Inheritances and divorce

One thing that often crops up, is whether my inheritance is taken into account in a divorce?

Sometimes people are thinking about future inheritances, for example if they have elderly parents, and are likely to inherit in the future. Generally the courts won’t take that into account. This is because of the uncertainty about whether, when and how much will be received, and also, because it’s viewed as non-matrimonial . However, that can create unfairness (e.g. if one spouse has inherited and the other one hasn’t, but is likely to after the divorce).

The more common question is what happens to money already inherited by one person. The law is shaped by the case of White v White in2000. This distinguished “matrimonial” property from “non-matrimonial”. Matrimonial property is created during a marriage by the parties (e.g earnings from a work or a business) and non-matrimonial is external (e.g. inheritances, or money owned by one person before the relationship began).  The court held that Property acquired before marriage and inherited property acquired during marriage come from a source wholly external to the marriage. In fairness, where this property still exists, the spouse to whom it was given should be allowed to keep it. Conversely, the other spouse has a weaker claim to such property than he or she may have regarding matrimonial property.

What that means is that inheritances might be excluded from divorce claims. However, things are never that simple! The true answer is grey, rather than black and white. The relevant law (Matrimonial Causes Act 1973) expressly states that needs must be taken into account. Typically this means financial needs, such as having somewhere to live and an income. Section 25 of the Matrimonial Causes Act lists various factors the court must consider, and since the Act was made in 1973, caselaw has emphasised that needs usually comes very high up the list.

This means that if the inherited money is required on a needs basis, then it will potentially be shared. That begs the questions, what are financial needs? Should I have a house costing £200k or £2m? Every case is different and needs vary from family to family. There is useful guidance in this report issued by the Family Justice Council in 2018. But in a usual case, the court will look to see if both parties can have a separate property if possible.

In short, if inherited money is required to meet financial needs, then yes it is more likely to be shared in a divorce. Alternatively is financial needs can be met from matrimonial resources (other money generated in the marriage through work), then it is less likely to be taken into account.

Please remember every case is different so this is just an indication of the starting position. There are many more variable at play. In particular the court will look at when the inheritance was received (generally money inherited many years ago is more likely to be shared than an inheritance received recently). They will also look at how the inheritance has been used. If it has been used for family purposes and mingled with other money (e.g used to pay off the mortgage on the family home) it is more likely to be shared than if it has been kept separate (e.g invested in a portfolio and left untouched).

If you are worried about this, couple can prepare a post-nup during a marriage which is a document spelling out what should happen on divorce. This can be an effective way to prevent an inheritance from being taken into account. This type of agreement can only be made if you both agree, so whilst you are on good terms, rather than when you have got to the stage of separating.

As always, it’s essential to take proper legal advice.