If you’re going through a divorce and have received (or expect to receive) an inheritance, it’s reasonable to be concerned about whether you can effectively safeguard this from your ex-partner. Similarly, if you are in the position of not having an inheritance, you may wish to know if you would be entitled to a share to assist with meeting your needs.
Inheritance can be an emotional and difficult facet of Financial Remedy cases, especially if the inheritance came from a parent or close family member, or the parties were unaware that inheritance could be considered as part of a divorce settlement. Unfortunately, the Family Court deal with a significant amount of misinformed litigants who believe that any inheritance, if left for them, cannot be subject to sharing. This is incorrect.
Inheritance can be subject to division on divorce, but this is not a starting point and the Court certainly do not look to divide this on every occasion. The circumstances of the case as a whole will be examined, to work out whether ‘fairness’ is best achieved by using the inheritance in a different manner to which it was intended, or not.
Fundamentally, inheritance is treated differently from assets that are built up during a marriage. However, the same risk can run in terms of division depending on how the inheritance is received, how it is used, and other assets available as a recourse for meeting needs.
The Matrimonial Causes Act 1973 requires the Court to assess all the circumstances of the case. Any inheritance would be considered in financial disclosure alongside property, savings, income and pensions. There is no assumption that a solely owned asset is ringfenced away – but this may be an argument that somebody runs, depending on the full circumstances. Inheritance is classed as non-matrimonial property, which can make it easier to argue that it should remain with that person.
However, there are some questions that the Court will ask itself when determining if this is the right outcome:
Firstly, does this outcome meet the needs of the parties? Are there enough assets to ensure that both of you can manage despite the inheritance not being shared? If so, the inheritance is more likely to be excluded from sharing. If a fair outcome is not possible without sharing, or the retention left one party completely unable to take care of themselves (subject to fairness), then the Court are able to disperse these funds to secure a more suitable and balanced outcome.
If the retention means that one party cannot re-house themselves, there is a risk of being forced into financial independence when they are not ready, or there could be complications with the housing of the children, then ringfencing is unlikely to be endorsed. Needs can and will outweigh who the inheritance initially belonged to, but only if necessary.
Secondly, has the inheritance been mingled (or mixed) into the marital assets? If the inheritance has already been received, was it used to pay off the mortgage or renovate the family home? Was this transferred and spent in the joint account? Was it spent by you but for the benefit of the family or your ex-partner that you now regret? Was it used to make ends meet? Once this line is crossed, it becomes much harder to argue that it should be kept separate. This is especially when the inheritance has already been spent. The Court cannot ‘magic’ funds back into the pot, in cases where this was spent on a monthly basis to meet expenses. If inheritance was placed into assets such as the property, leading to more equity, there can be complicating arguments about how much the inheritance benefitted the asset versus generic market value. The Court do not like scrutinising or entertaining such arguments. The starting point will be that the assets are taken as they are at the time of divorce, if needs is the primary factor. If the inheritance has been kept separate and has not been spent, used for joint purposes, or has only been utilised to benefit sole assets, the lack of mingling may strengthen an argument for this to be kept separate as this did not increase the standard of living.
Thirdly, what is the timing in this case? Was the inheritance received before the marriage? If so, the starting point is non-matrimonial but this will depend on the level of mingling. If received during, this is more likely to be considered matrimonial and subject to division as part of the financial scope of both parties. If inheritance was received after, this is usually non-matrimonial but still must be disclosed under the Form E and will depend highly on needs (intermingling less prevalent if the parties have separated). The Form E also requires disclosure of ‘imminent’ inheritances even if this has not yet occurred. However, this does not include speculative questions about all possibilities, and generally would be limited to inheritances expected within the following 12 months.
Finally, consider the length of the marriage. Under the Matrimonial Causes Act 1973, this is a factor that the Court consider when they consider the needs of either party, based on their standard of living, and the intentions and financial scope of the marriage itself. The assumption is usually that a longer marriage (7/8+ years) involves more financial planning, intermingling of assets and joint intentions. Therefore, sharing is usually considered the fairest outcome unless there are specific factors to indicate otherwise. If the marriage is short, there is usually less mingling or opportunity to do so, and needs becomes less prevalent given that the pre-marriage circumstances were not long ago. Inheritance is usually argued to remain separate in these cases.
Aside from the above, it is also useful to consider whether you have a pre or postnuptial agreement that deals with any inheritance (a standard precedent usually should deal with this question). If you are not considering divorce but expecting inheritance, is it worth entering into a postnuptial agreement or taking advice about the ‘do’s and don’ts’ of where to place your inheritance?
There’s no singular answer for inheritance and divorce, but the criteria above will generally shape the Court’s perspective on how it is best dealt with. Fundamentally, where assets are negligible otherwise, needs must come first but this is not a blanket rule if the inheritance is separate and the marriage was short. The Court’s decision can turn on several factors and circumstances that will change in each case. If you are seeking to ringfence your inheritance, this will require an honest examination of how your marriage fits into the above categories, and if needs can be met fairly despite a disparity in capital caused by inheritance.
Hannah Newberry
Hannah Newberry is AJFL’s Co-Director and Solicitor, qualifying in 2022 after training with the practice. Known for her calm and supportive approach, Hannah advises on all aspects of Family Law, including children and financial disputes, divorce and injunctions, draft agreements and unmarried couples.
Hannah has been recognised as a Rising Star finalist in the Cardiff and District Law Society awards. Hannah sits as Former Chair and Law Society Officer of Cardiff JLD, Professional Development Officer of Cardiff and District Law Society, and serves as a Board Member of the National Board for Wales (Law Society Wales).
