What Happens to my Inheritance on Divorce?

When dividing financial assets on divorce, the Court’s approach is effectively a starting point of a 50:50 division of matrimonial assets, although there are various factors that can lead to a departure from this, such as the parties’ respective needs.

The first thing to determine therefore is what actually constitutes the matrimonial assets. An inheritance that one party receives, whether before, during or after the marriage is initially considered to be a non-matrimonial asset. Non-matrimonial assets are generally excluded from the matrimonial pot when dividing the assets. It should be noted however that even non-matrimonial assets can be taken into account by the Court when resolving financial matters on divorce if the parties’ needs cannot be met without doing so.

Although inherited property may initially be considered to be a non-matrimonial asset, it can become a matrimonial asset depending on how it has been used during the marriage and whether it has been mixed with other matrimonial assets. For example, if an inheritance consists of a property that the parties have occupied during the marriage or an asset that the parties have relied on to meet their income needs, then the inheritance may be considered to have become a matrimonial asset. Similarly, if an inheritance has been mixed with other matrimonial assets such as by pooling savings so that the inherited assets can no longer be distinguished, or by investing inherited money in the matrimonial home then again the inheritance is likely to be considered to have become matrimonial property. If the inherited assets have become matrimonial property then the fact of the inheritance can still be raised as a factor to be considered in any overall settlement, but this may well be less advantageous to the person who owned the inherited assets than if they were held separately and could be excluded from the matrimonial pot.

The Court has a considerable amount of discretion where financial matters on divorce are concerned, and the precise outcome in any given case will usually depend on the specific circumstances. That said, it can be seen from the above that there are various principles that the Courts tend to follow and the manner in which inherited assets are used can affect how they are dealt with when dividing the finances on divorce.

Possible future inheritances are also a very good reason for ensuring that any financial settlement on divorce is properly formalised by way of a consent order approved by the Court. Such a consent order should state how the assets are to be divided and what provision there may be by way of maintenance. It should also state that all other claims are dismissed and that neither party can make any further claims against the other in future. This would bar a former spouse from making a financial claim against the other party in the event of them receiving an inheritance in future.

Taking the above into account it can be very beneficial for parties to seek early advice from a family solicitor where inheritances or possible future inheritances are involved.