Spousal inheritance shares upon divorce
By Julia Cluley
Julia Cluley considers if spouses can be prevented from claiming inheritance on divorce
A party to a marriage or civil partnership may understandably be concerned to know whether their spouse might be awarded a share of assets inherited, if they ever divorce – and what, if anything, they could do to reduce the chance of this happening.
Firstly, there is a general principle, even where short marriages or civil partnerships are concerned, that property acquired during the marriage through joint efforts of the parties should normally be shared equally on divorce. This includes the family home, regardless of how, when, or by which party it was acquired. Such property is known as matrimonial property.
In some cases, courts have to decide how to deal with property - other than the family home - acquired by one of the parties while together. This might be money or assets inherited or gifted to a party during marriage – non-matrimonial property. Generally, and especially in short marriages, the court starts with the view that a party should be allowed to keep their own non-matrimonial property.
It is important to stress that needs are always an important factor. If half of the matrimonial property was not enough to meet one party’s reasonable needs, including their housing needs, this might result in them retaining more than half of the matrimonial property, because the other party has recourse to their inheritance. Needs will always take priority, as the court considers each party that will need sufficient resources to meet their reasonable financial needs.
The issue as to non-matrimonial property is not clear cut and depends on the facts of the case. A small amount of money inherited at the start of a long marriage, either spent by the parties or mixed with matrimonial assets – using an inheritance to pay off or reduce the mortgage on the family home, for example – may not be ring-fenced or treated differently from matrimonial assets.
Relevant factors can include when it was received during the relationship, how substantial it is compared to the value of the overall matrimonial property and how it has been used. If parties generally kept their finances separate and inherited money has always been kept by one party and not shared, it may be more likely to be retained by them on divorce. If, on the other hand, an inheritance was used to buy an investment property and both parties worked on it and the rental income was enjoyed by both for their joint benefit during the marriage, then a party might seek to argue that it had become matrimonial property because of how it had been used and treated, and say it should therefore be shared.
What then would the position be about a potential inheritance? It is often the case on a divorce that one party will say in due course that the other will inherit money, perhaps on the death of their parents and say that this should be taken into account in the divorce settlement. However, the courts will look at the situation as it is at the time of divorce – and unless a relative is very ill or has died, and it is clear that one party to the marriage is likely to benefit in the near future, the court is unlikely to take a potential future inheritance into account. This is especially so if a relative is still alive, as they could always make a new will (providing they have the necessary capacity to do so).
So what, if anything, can a party to a marriage or civil partnership do to avoid their inheritance being lost on divorce? While it is always advisable to have a pre-nuptial agreement drawn up before the marriage, if there hasn’t been time, you can always enter into legal agreement after the marriage.
This is known as a post-nuptial agreement – a legal document entered into by the parties after they have married, which sets out what they intend to happen in the event the marriage ends in divorce. This can be a very useful tool, because it will avoid any arguments later on about what the facts were – and what was and what was not intended in respect of an inheritance.
The parties will need legal advice on this and will be advised that it is always necessary to ensure that the reasonable needs of the other party – and of course the needs of any dependent children – have been met, but subject to that, taking advice at the time of the inheritance would be a wise step.
Not only will this potentially avoid expensive wrangles later on, but both parties could also have a clearer understanding of what is intended to happen in the event the marriage ends in divorce.
Julia Cluley is a family law specialist solicitor with Valemus Law: valemuslaw.com