The subject of inheritance in a divorce can be a complex and divisive issue. Many spouses naturally assume that any inherited assets remain theirs alone, but in reality, English courts adopt a much more nuanced approach. Whether you’re aiming to safeguard what you consider to be yours, or want a fair share of everything you’ve accrued together, there are several factors that will have a major bearing on the outcome.
Can an inheritance be protected, or will it become part of the financial settlement? In this blog, we explore the details that determine whether inherited wealth stays separate or is divided — offering essential insights for anyone looking to safeguard their financial wellbeing.
How the Courts View Inheritance in a Divorce
In English law, inheritance is assessed in the same way as other assets in a divorce: it is classified as either a matrimonial or non-matrimonial asset. If it falls into the matrimonial category, it can be included in the financial settlement. Otherwise, it may be treated as belonging to one spouse alone. However, there is no fixed formula for determining this, and decisions are influenced by several factors.
One of the primary considerations is whether there are enough marital assets to meet both parties’ financial needs. Unlike future inheritance (which is uncertain), past inheritance is already part of the couple’s resources and can be considered when required. If excluding inheritance would leave one spouse without adequate financial support, the court may decide to include it in the settlement.
Several key factors influence whether an inheritance becomes part of the matrimonial pot:
- Mingling with Marital Assets: If an inheritance has been kept separate — such as in a personal savings account — it is easier to argue that it should remain a non-matrimonial asset. However, if the inheritance has been mixed with joint assets, such as by paying off a mortgage or being placed into a shared account, it may be considered part of the marital estate and subject to division.
- Timing of the Inheritance: The stage at which an inheritance is received can affect its treatment in a divorce.
- Before Marriage: Inheritance received prior to the marriage is more likely to be considered separate — but this is not guaranteed.
- During the Marriage: If received while married, inheritance is at greater risk of being classified as a shared asset, particularly if it has contributed to joint expenses.
- After Separation: Inheritance received post-separation is generally less likely to be included unless financial need dictates otherwise.
- Needs of the Parties: If there are ample other assets — such as multiple properties, savings, and pensions — the courts are less likely to include an inheritance in divorce. Conversely, if there are few marital assets available, inherited funds may be used to ensure fairness.
- Length of the Marriage: The longer a marriage lasts, the more likely it is that finances will have mingled. In short marriages (under five years), it is generally easier to argue that inheritance should remain separate. However, in longer marriages (15+ years), inherited assets are more likely to be absorbed into the matrimonial pot, particularly if they have been used to support the family over time.
Ultimately, whether an inheritance is included in a divorce settlement depends on the unique circumstances of each case. Given the complexity of these considerations, seeking expert legal advice is essential for protecting your financial position.
Common Strategies to Protect Inheritances in Divorce
If you want to try to ensure that your inheritance remains yours in the event of a divorce, there are several strategies at your disposal. While none of these methods come with an ironclad guarantee, proactive planning and financial structuring can at least help to reduce the risk of an inheritance being included in a settlement.
The strategies your family lawyer might discuss with you are:
1. Keeping Inheritance Separate from Marital Assets
It’s much easier to establish inheritance as a non-matrimonial asset when it hasn’t already been mixed with other shared finances. This means: keeping inheritance money in a separate personal bank account, not using it to settle joint debts (including mortgages), and not investing it in a shared property or business venture.
As an example, if you inherit £200,000 and use it to buy a property in your sole name, this could strengthen the argument that it is not a joint asset. However, if you were to place the endowment in a joint current account — and it has been used over the years to pay for day-to-day living expenses — it could easily be regarded as being a shared property and open to being divided when the relationship breaks down.
2. Using Trusts and Estate Planning
Setting up a trust can sometimes help protect family wealth from being included in a divorce settlement. If a parent or grandparent wants to pass down inheritance while keeping it separate from marital assets, a discretionary trust can provide an additional layer of protection.
However, caution is essential here. If a trust appears to have been created solely to shield/hide assets from divorce proceedings, it may be disregarded entirely. A trust may be deemed a sham if it was created just before divorce, allows the beneficiary full control, is intended to obstruct a fair settlement, or was created purely to conceal assets.
When Trusts May Offer Protection
The criteria by which a well-structured and genuinely established trust can protect inherited assets includes:
- It must have been created long before the marriage.
- The spouse cannot have direct access to the trust assets.
- The trust must have been set up for genuine estate planning purposes (e.g., benefiting multiple family members and not just the spouse).
3. Drafting a Nuptial Agreement
Although not technically legally binding in England and Wales, nuptial agreements are increasingly recognised by our courts — especially when they are fair and properly executed. There are two types of nuptial agreement, with the terminology shifting depending on whether the contract was drafted before or during wedlock.
- Prenuptial Agreements: Signed before marriage, ‘prenups’ specify how assets (including inheritance) should be divided if the marriage ends.
- Postnuptial Agreements: Postnups essentially serve the same purpose as prenups, with the only difference being they are agreed during the marriage and not before.
The Courts’ Criteria for Nuptial Agreements
A nuptial agreement will not be automatically upheld when the time comes to separate. In fact, there is a set criteria which will determine its effectiveness. In effect, the courts will only uphold a nuptial agreement if:
- Both parties obtained independent legal advice.
- The agreement was fair to both spouses.
- There was full disclosure of assets at the time of signing.
4. Document Everything
Our final strategy for individuals who are concerned about inheritances in divorce is to document everything. Maintaining clear records of inheritance transactions can help support claims that an inheritance has remained separate from matrimonial funds.
This includes: bank statements showing the inheritance has not mingled with marital finances, property ownership documents proving assets were not jointly owned, and legal documents confirming inheritance was gifted solely to one spouse.
Lowry Legal: Your Valued Guide for Inheritances in Divorce
There’s a lot to take into account when dealing with inheritance in a divorce. Factors such as timing, financial need, and how the assets were used throughout the marriage all have a significant bearing on the eventual outcome. The law might not always seem straightforward, but expert legal guidance can be essential for protecting your financial position — now and in the future.
At Lowry Legal, we specialise in high net worth divorce and finances after separation, providing strategic advice tailored to your unique circumstances. If you need clarity on how your inheritance may be treated in a divorce, our expert team is here to get to the heart of your relationship and devise practical strategies that are tailored to your needs.
Contact us today to safeguard what’s rightfully yours or get the fair share you deserve.
