Dividing your marital assets and starting a new chapter of your life may make you believe that this is the end of the matter. But where do inheritances come into the equation?
With the value of inheritances set to double over the next 20 years, many divorcing couples are rightly worried about whether their former spouses have a future claim. The answer is not as straightforward as many think. In some cases, your ex-partner could have a claim upon your inheritance.
In this guide, we discuss whether your ex-partner can claim your inheritance, and in what scenarios they might have a claim.
Is inheritance classed as a marital asset?
Under English law, inheritances are not automatically considered to be a marital asset. The law takes the approach that inheritances are not jointly received, and it would be unfair to include them as a marital asset as standard.
So, it’s a myth that inheritances are automatically included in divorce proceedings, but that also doesn’t mean they’re automatically excluded either. Generally, the Family Court aims to take a holistic approach to division to ensure fairness and that “reasonable needs” are met. At the heart of this is the Matrimonial Causes Act 1973, which gives courts broad discretion, and that applies to inheritances, too.
Of course, this assumes that an inheritance was kept separate. If you’ve added your inheritance to a joint account and used it on family expenses, the court will rightly see that you intended for it to be used on the family, rather than for your own sole benefit. In this case, they’ll likely classify it as a matrimonial asset.
Can an ex-partner claim your inheritance?
Protecting your inheritance isn’t as simple as ring-fencing it from a joint account and putting it into a trust solely in your name. The Court looks at what it takes to provide for the reasonable needs of both parties with the priority being the needs of any children. It’s a flexible concept, and it’s flexible by design.
If the right to claim inheritance is prohibited in the divorce settlement
Suppose your inheritance has been ringfenced successfully and the right to claim isn’t pre-set in the divorce settlement, it would be considered a non-matrimonial asset. That means it won’t be factored into the final division of assets.
However, what we’ve seen in the past is that courts still have the right to intervene if there are no other methods of providing for the reasonable needs of each party.
How do you protect your inheritance from divorce?
Naturally, you want to protect your inheritance during divorce proceedings. The most common scenario is wanting to ensure the money goes to your kids, not to your ex-partner. Is there a way to do this?
Several mechanisms exist, including:
· Pre-nuptial agreements
· Post-nuptial agreements
· Separating your inheritance from matrimonial assets and avoiding any mingling
· Placing the inheritance in a trust for your children
The problem is that these require advance planning and legal help to work in practice. If you’re only thinking about this when a divorce is imminent, it becomes much harder to protect your wealth. If this is you, it’s time to seek legal advice immediately.
Inheritance received before or during marriage
The easiest way to protect an inheritance before marriage is to establish a pre-nuptial agreement. This allows both parties to agree that this particular asset is to be considered separate property and shouldn’t be mingled with the family’s joint finances and should not be shared upon divorce.
If an inheritance is received during a marriage, it depends on whether it’s been merged with the family’s finances. That’s known as matrimonialisation. You can protect it by holding it separately and not using it for family purposes to keep it as a non-matrimonial asset or putting it into a trust for the benefit of your kids.
Note that English law still allows courts to invade inheritances in all scenarios if it’s needed to meet the reasonable needs of all parties, including your children.
Inheritance received after separation but before divorce
Going through a divorce and receiving a settlement can change things. It’s tricky timing, but the rules don’t change if you are separated but still married.
The Family Court will still take a post-separation inheritance into account and parties are still required to disclose these. However it’s a valid argument to advance that not only was the money/assets inherited but they were only received post separation and therefore cannot possibly be classed as matrimonial assets and therefore should not be shared upon divorce.
Future inheritance received after a divorce
An expected inheritance in the future usually won’t be considered in any divorce settlement unless the inheritance is imminent i.e if somebody has recently passed away and you are due to inherit from their estate. However if you are simply named in a will by a person who is still alive and well then this is not usually relevant to a divorce.
In order to protect against future financial claims being made then you should ensure you obtain a financial order, which is a legally binding financial document made by the Court which details a financial settlement and can dismiss all future financial claims arising from the marriage.
Generally, though, an inheritance you might receive a decade or two after your divorce should be safe from any future claim.
In all cases, if you’re worried about the fate of your inheritance, the best course of action is to consult a professional. Working with expert divorce solicitors at VM Family Law can lay out your options, establish the necessary groundwork, and explain your legal rights so you can keep what you’re entitled to.
Contact us to learn more about managing your inheritance within the framework of your divorce today.