Do you need advice about divorce and future inheritance? Perhaps the breakdown of a relationship has led to concerns that your expensive gifted assets could be shared with your spouse in the final settlement? Conversely, is your former partner expecting an inheritance that you believe you’re entitled to? Whether you want to obtain your fair share during separation or are seeking to protect your best interests, it’s crucial to understand the key features of this complex area of law.
To fully appreciate the potential outcomes, there are a number of key areas that benefit from being simplified. These include definitions of matrimonial and non-matrimonial assets, opportunities to protect inheritance, the objectives of the courts, and more. This information is intended to clarify this intricate process, and put you on a more secure footing in the future.
Understanding Matrimonial Vs Non-Matrimonial Assets
During divorce in England and Wales, the courts’ primary concerns will be the fair division of assets. This will require talking about everything the couple owns, including properties, savings, investments, pensions, business interests, etc. Alongside existing possessions, discussions can also include future anticipated assets, such as distribution of trusts, with future inheritance under a will being a common feature.
However, all assets will need to be classed as either matrimonial or non-matrimonial in order to determine whether they’re included in the ‘shared’ marital pot. If you’re concerned about the implications for divorce and future inheritance, it may be useful to further define matrimonial and non-matrimonial assets.
Matrimonial Assets
Any assets built up over the course of a marriage, often jointly, are classed as being matrimonial. These include any equity relating to the family home, pensions, and any increases in value of business. When the courts are working towards a fair split, it’s less relevant if one party has contributed more towards financial gains than the other, as the division of assets transcends antiquated terms like ‘breadwinner’ and ‘homemaker’.
Instead, both are viewed as having made different — but equal — contributions, meaning the matrimonial assets should ideally be shared equally, regardless of who fulfilled what role within the relationship. This assumes that everybody’s needs can be taken care of.
Non-Matrimonial Assets
Non-matrimonial assets generally could be thought to be anything that was not the result of joint endeavour between spouses. By this, we’re talking about assets that were not acquired or built up through the shared efforts of both spouses during the marriage. These might include:
- Wealth accumulated before the marriage
- Third-party gifts received by one spouse
- Inheritance received during the marriage
- Post-separation financial windfalls
While this type of asset might sometimes be “ring fenced”, much will depend upon whether there is enough capital in matrimonial assets alone for both parties’ needs to be comfortably taken care of after divorce.
However, it must be stressed that the definition of matrimonial and non matrimonial assets is fluid in its very nature. Hence, why there can be significant litigation to determine how a matrimonial pot should be divided.
What Could Happen With Divorce and Future Inheritance?
The subject of future inheritance and divorce might sometimes appear ambiguous to someone going through a separation or civil partnership dissolution. Because so much depends upon personal specifics, there isn’t always a conclusive answer to the question, ‘Is inheritance part of divorce settlement?’. In reality, there are various permutations, and only advice from a legal professional is likely to fully explain your options.
What Does the Law Say?
As per Section 25(2)(a) of the Matrimonial Causes Act (MCA) 1973, the court may choose to explore ‘…other financial resources which each of the parties to the marriage has, or is likely to have, in the foreseeable future’.
In short, inheritance is not automatically exempt from the matrimonial pot when considering finances after separation. Although its inclusion might be rare, it can be included — especially if the current marital pot is insufficient, and only the addition of the expected inheritance could provide the funds to meet both spouses’ financial needs.
Sometimes, even if the court does not directly include the inheritance as a divisible asset, it can still be considered a financial resource that will be available to one of the parties.
Could Timing Affect Your Case?
Yes, timing is crucial for future inheritance and divorce. If inheritance has been received throughout the course of a marriage and has been mingled with matrimonial finances, the court is more likely to view it as part of the shared assets.
However, if an inheritance has only just been received towards the end of the marriage, or is anticipated but not yet acquired, it may be easier to argue that it should be ring-fenced, provided there is no pressing financial need.
Can a Spouse Make a Claim Post-Divorce?
In short, yes, it is possible, in limited circumstances, for a former spouse to make a claim on your inheritance even after divorce, if financial claims have not been tied up in the form of a Consent Order.
Strategies for Protecting Your Inheritance
The following strategies could be discussed between legal teams and their clients:
- Keep Inheritance and Matrimonial Assets Separate: As touched upon earlier, it’s important to have a clear distinction between the shared and the personal. This means not keeping your inheritance in a joint account and not using the funds to pay for matrimonial assets such as the family home.
- Maintain Detailed Records: If you can provide evidence that your inheritance has remained separate from joint funds, this could give your family lawyer the best chance of proving that it hasn’t mingled with shared funds.
- Meticulous Estate Planning: Consider the likelihood of what would happen during divorce when discussing your estate plans with a legal professional. Explain your priorities to ensure that you are afforded layers of legal protection if the worst were to happen.
- Obtain Legal Advice: Every relationship is different, which means there isn’t a hard and fast rule that is applicable to divorce and future inheritance. Speaking about your circumstances with a specialist family solicitor will clarify your options and strategies for the rest of the divorce process.
- Consider Nuptial Agreements: Although nuptial agreements are not strictly legally-recognised in England and Wales, the courts increasingly refer to them when considering the division of assets. These can come in two forms; prenuptials being agreed before marriage and postnuptials being agreed when the marriage has begun. As long as both parties enter into them without coercion, and nothing important is concealed, this is possibly your best option for clearly defining who is entitled to what if the relationship should end.
Examples of How Inheritance Can Impact Divorce Settlements
Understanding how courts handle inheritance in divorce can be challenging, as each case is unique. Below are two examples that illustrate different scenarios, highlighting the key legal principles and potential outcomes. These cases demonstrate how factors like timing, financial needs, and asset mingling can influence decisions on inheritance and divorce.
Example 1: Protecting an Anticipated Inheritance
A high-net-worth individual was set to inherit a substantial sum from a family trust. Despite divorce proceedings beginning before the inheritance was received, the court considered the inheritance as a potential financial resource. However, because the spouses had clarified the future inheritance in a fair and transparent nuptial agreement, it was successfully ring-fenced from the settlement.
Example 2: Inheritance Used for Matrimonial Purposes
A business owner inherited £500,000 from a deceased relative during the course of their marriage. The money was deposited in a shared account and over time, was used to pay off the mortgage on the family home and fund family holidays. Because the inherited income was mingled with shared assets, the court ruled that it should be treated as part of the matrimonial pot and, therefore, divided.
Future Inheritance and Divorce: 4 Key FAQs
For anyone who is concerned about the implications of future inheritance and divorce, it’s understandable to have urgent questions. Here are some of the most common ones to help you understand your situation:
- Could Future Inheritance Affect Maintenance Payments? Yes, any significant asset could be regarded as a factor in the overall financial picture. If the windfall is expected to be significant, it could have an impact on maintenance payments.
- Would Remarriage Affect Future Inheritance and Divorce? Yes it can, as it might impact on any previous agreements made in relation to your existing heirs. If an existing will isn’t updated in a timely manner, your new spouse could inherit elements of your estate that might have been earmarked for children of a past relationship. Understandably, this often proves to be highly contentious.
- Can an Inherited Trust Be Divided in Divorce? The courts will scrutinise the purpose of a trust in divorce, with the intention of determining whether one was set up purely to avoid asset division. If it is deemed to be a ‘sham’, it may be classed as matrimonial and be divided among spouses.
- Do I Need a Solicitor to Help With Divorce and Future Inheritance? Although you are not legally obligated to enlist a solicitor, it is strongly recommended. Obtaining reliable legal advice tailored to your circumstances could ensure that you fully understand your options and reach a much more beneficial, timely outcome.
Lowry Legal: Experts in Divorce and Future Inheritance
Are you concerned about the implications of future inheritance and divorce? Whether you’re looking to protect your future finances with a nuptial agreement or are seeking advice about your separation, the importance of reliable legal guidance is paramount. Ultimately, obtaining trustworthy advice at the earliest opportunity can give you the best possible chance of securing a positive outcome.
A well-regarded member of the prestigious Legal 500, Lowry Legal has a wealth of experience in handling complex family law cases for high-net-worth individuals. Our expertise includes protecting trusts, inheritance, and international assets.
To take your first step towards financial security, contact our team today.
