Consideration must be given to inheritance when entering marriage or going through separation

As Family Solicitors we are seeing an increasing number of clients whose inherited assets and / or inheritance prospects are a significant issue within their divorce.  Consequently, many clients have questions relating to how their inheritance or inheritance prospects will be treated on divorce, before they have married.  The position is unfortunately far from straightforward.

Dividing Marital Assets

When dividing marital assets, the Court has a wide discretion, but Section 25 of the Matrimonial Causes Act 1973 sets out all of the factors which a court will take into account when considering settlement.  Section 25 (2) (f) refers specifically to contributions made by each of the parties to the marriage.  Within this section, inherited assets can be a contribution.

Things to be considered

The extent to which inheritance will be considered will largely depend on the specific circumstances of the client’s case.  A significant factor in this situation relates to whether the parties can meet their individual needs without recourse to the inherited assets.  Additionally, factors such as the length of the marriage, when during the marriage the inheritance was received and how the inheritance was held or invested, for example was this held by the recipient solely, invested jointly or spent are all considered.  The “mingling” with other marital assets and how the inheritance may have been used is also relevant. 

The timing of the inheritance being received is important because it is highly likely that inheritance received at the beginning or early part of a marriage is likely to have been mingled with other assets or indeed used to fund the family lifestyle.  In such a scenario it is highly unlikely that the inheritance received would be ‘ringfenced’ or excluded from a divorce settlement and it is likely that the entire inheritance will be taken into consideration upon division of the marital assets.

By contrast an inheritance received towards the end of a short marriage, post separation or put in a separate account in the receiving party’s sole name and not mingled with the marital assets may see that inheritance excluded from the division of marital assets and therefore retained by the receiving party.

The issue of potential inheritance is not an easy issue for people to consider or address prior to marriage, but it is important to consider the passing of wealth from parents either prior to, or during a person’s marriage.  Many people ask us how they can protect their future inheritance and one way of doing this would be to have a prenuptial or post nuptial agreement.  These agreements express the clear wishes of the parties as to how inheritance will be considered and could if agreed, determine that any inherited assets will be retained by the person inheriting them, in the event of a divorce.  Whilst these types of agreements are not wholly legally binding, if done correctly and with the appropriate legal advice they are now considered to be very persuasive to a court.

It is difficult to consider someone’s potential prospect of inheritance in the event of divorce proceedings.  We see many cases where a client will ask us if they can receive a share of their former spouses future inheritance when the time comes, however the Court will be reluctant to consider one person’s prospect of an inheritance in the future because it is considered too remote.  Consideration must be given to the fact that the person from whom the receiving party might inherit may not ultimately leave that person any inheritance, may fall out with that person and exclude them from their will or could use all their money and assets for their own benefit or for example need it to fund their own care. 

In cases where an inheritance is likely to be received imminently, it is possible that it could be considered in the division of the marital assets, although this would likely be dependent on the circumstances of the divorcing couple. 

Seeking Legal Advice

It is important that for those people who have significant inheritance prospects and maybe considering marriage, expert legal advice should be sought.

For advice contact Philip Rea, Director of Family Law or a member of Thursfields’ Family Law team on 0345 20 73 72 8 or info@thursfields.co.uk

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