Protecting Inheritance on Divorce
Divorce often brings a mix of emotions, including anger and frustration, and it can become even more stressful when one partner tries to claim the other’s inheritance. Along with dividing assets and sorting out child arrangements, inheritance can become a concern during divorce proceedings.
Inheritance refers to assets or finances a person receives after a relative’s death, typically through a will or trust. It can include cash, investments, real estate, vehicles, jewelry, and other valuable items.
When a couple divorces, inheritance may come into question, as one partner might attempt to include the other's inheritance in the divorce settlement. This can happen whether the inheritance was received before or during the marriage. Even if inherited assets were acquired before the marriage, they can sometimes get mixed with marital property, leading to disputes over ownership.
In England and Wales, inherited property is not automatically considered part of the marital assets. The court decides whether the inheritance will be made available for division. If there aren’t enough marital assets to meet both partners' needs, the court may allow one spouse to benefit from the other’s inheritance, especially if children are involved, as their needs often take priority.
According to Section 25 of the Matrimonial Causes Act 1973, courts consider many things when deciding how to divide assets. Inherited assets are included as one of the factors the court will look at.
Whether an inheritance is included in a divorce settlement depends on the specific details of the case, especially if both parties can meet their financial needs without using the inherited money.
The court will consider things like:
How long the marriage lasted
When the inheritance was received
How the inheritance was handled: Was it invested? Put into joint accounts? Spent on family expenses?
The court is especially interested in whether the inheritance was kept separate or mixed with family finances. Many divorce cases are settled out of court through lawyers, mediation, or other methods, but the same principles apply.
Some examples:
If someone received an inheritance early in a long marriage and used it to buy the family home, it’s likely that the inheritance will be included in the overall division of assets.
If the inheritance was received near the end of a short marriage, kept in a separate account, and not used for joint expenses, it may be excluded, allowing the person who received it to keep it.
There are many possibilities between these examples, and the court has the flexibility to either include the inheritance fully, exclude it entirely, or make some adjustments based on the situation.
A common way to protect inherited wealth is through a prenuptial or postnuptial agreement. These agreements outline how assets, including inheritances, will be divided if a marriage ends. A prenuptial agreement is made before marriage, while a postnuptial is made afterward.
Both parties must fully disclose any expected inheritance when drafting the agreement. Though not legally binding in the UK, courts often consider them during divorce settlements. To ensure validity, the agreement must be entered into freely, with full disclosure and clear understanding by both parties. A family law solicitor can help ensure it's properly prepared.
There are several ways to protect your inheritance after divorce, including:
Updating your Will: If you've received an inheritance, make sure your Will is updated to reflect how you want it handled after your death.
Placing your inheritance into a Trust: This can protect your assets from future claims, including those from an ex-partner. Get advice from legal and financial experts before setting up a Trust.
Full financial disclosure: Be honest about your assets during divorce proceedings. Failure to disclose everything can result in your ex receiving a larger share.
In short, protecting your inheritance requires careful planning. Use prenuptial agreements, Wills, and Trusts, and seek expert advice to secure your assets and financial future.
