Inheritance and Divorce
Inheritance can often be one of the most disputed and contentious issues when dividing up financial assets following a divorce. There are often disputes about whether or not inheritance should be included or excluded from the matrimonial pot when dividing assets between parties upon divorce.
If the inheritance has already been received, whether or not it should be included depends on a number of factors which differ on a case by case basis, such as when the inheritance was received, how long the marriage was, or whether it is needed to meet housing needs, for example.
If the inheritance is to be received in the future, as this would be being received ‘post separation’, it would be harder to argue that it should be taken into account when dividing assets between divorcing couples. However, whether or not it is taken into account in a divorce depends on its immanency, and for example whether it is going to be needed to meet the financial needs of either party in the case (amongst other factors).
As solicitors, we see issues surrounding inheritance crop up a lot. We find that there are two key things to consider when looking at inheritance issues arising in the context of a divorce:
- How likely is it that the person will actually receive the inheritance?
If the couple is young and the inheritance is due to come from one or both of their parents, for example, it could be that that money will not be passed down to them until well into the future. Equally, their parents could decide to leave that money elsewhere, they could spend it on lots of lavish holidays or perhaps it could be used for care home fees.
Arguably in this scenario, there is no immanency, the parties are young and the inheritance will not be required to meet financial needs now, so it may be harder for the other party to argue it is relevant to the division of the assets in the divorce.
- Should the inheritance be disclosed to the other person and the court in financial proceedings?
In the above scenario, where the couple is young and the chances of them receiving inheritance at some point in the future are probably around the same as them not getting anything, it is unlikely that they would be expected to disclose it.
However, if one of them is the beneficiary of a trust, or their parent/ parents have already died and the estate is being administered, then there is an obligation on them to make the other person and the court aware as part of their financial disclosure. Whether the inheritance is then taken into account will depend on the facts of the case, but its existence would clearly be relevant in this scenario.
What if the inheritance isn’t disclosed?
If a party chooses not to disclose inheritance even though it is very likely that they will benefit from it in the near future, then the court is likely to be critical of them for being dishonest. The repercussions and remedies of such behaviour really comes down to what stage of the proceedings the parties are at when that person gets ‘found out’.
If the inheritance comes to light during the proceedings, then the court may make inferences against that person because they have not been truthful. This could then be reflected in the overall financial outcome.
Alternatively, if the inheritance doesn’t come to light until the proceedings have concluded, but it is evident that that party was aware of it throughout the proceedings, the other person may choose to apply to the court for the final order to be set aside (if certain criteria have been met).
Due to the severity of these potential outcomes, it may be advisable to err on the side of caution and, if you are unsure whether or not to disclose the inheritance, then disclose it. That way, the parties can argue about whether or not that inheritance should form part of the matrimonial property and no one can argue that you purposely withheld the information.
Protecting your inheritance
As family law solicitors, we often get asked about how parties can protect their future inheritance should they ever get divorced.
Due to the current law in England and Wales, it is not possible to definitely ring-fence inheritance pre or post marriage, however there are steps that can be taken to try and limit the financial claims that your husband/ wife has over in them in the event of a later divorce. These include pre and post nuptial agreements which are discussed further in our blog.
If you are concerned about any of the issues raised above or anything else regarding divorce, financial or children matters arising from separation, you can contact us by email to firstname.lastname@example.org or WhatsApp to 07725 115219.
Alternatively, if you are able to call us then we would be more than happy to discuss matters with you over the telephone on 01625 544650.