Navigating Inherited Assets in Divorce Settlements: What you need to know

In White v White, when considering the available assets to be divided in the matrimonial pot, the Court developed the concepts of matrimonial and non-matrimonial property. It would seem to follow that all inherited assets should be classified as non-matrimonial property as they are not fruits of the partnership and should therefore automatically be excluded from the matrimonial pot. However, before excluding an asset from the matrimonial pot the court’s first, and main consideration will be the parties’ needs. The origin of the inherited property will carry little (or no) weight in many ordinary cases where a spouse’s (and any children’s) financial needs cannot be met without recourse to the inherited assets; in these circumstances the court may distribute the inherited asset like any other financial resource.

In situations where both parties’ needs can be met from the matrimonial property alone, an argument can be made that certain inherited assets should be ring fenced. Despite inherited assets being an unmatched contribution from one party to the marriage, the court will not automatically exclude inherited assets from the matrimonial pot in these circumstances. The court will consider a range of factors when determining the issue including (amongst others):

• The moment in time in the relationship when the asset was inherited – if an asset was acquired prior to the marriage (and from a source wholly external to the marriage) it is more likely that the asset shall be classified as non-matrimonial property; meanwhile if an asset was acquired during the marriage, it is more likely that the property will be considered to be matrimonial.
• The length of the marriage - in short marriages, the parties’ contributions (and source of the contribution) is more likely to be relevant when determining financial settlements; conversely, in longer relationships the parties’ finances will inevitably become more intertwined and the court may consider that the source of an asset will be less relevant and may in fact diminish over time.
• The nature of the inheritance - a valuable heirloom is more likely to be separated from the matrimonial pot than a portfolio of stocks and shares. The reason being, that an heirloom is less susceptible to mingling, meanwhile a family may dip in and out of a family portfolio or trust when cash is needed.
• The parties’ intentions in relation to the inherited asset throughout the course of the relationship and specifically, whether the asset has become intermingled with the parties’ finances.

No matter what steps are taken, inherited wealth can never be completely protected from a spouse in the event of divorce. Nevertheless, steps can be taken throughout the relationship to better protect the beneficiary’s position in the event of a relationship breakdown. Such steps could include, maintaining the distinct and separate origin of the wealth; taking well rounded legal advice; and entering into a pre-nuptial or post-nuptial agreement.

¹ White v White [2000] 2 FLR 981
² Robson v Robson [2010] EWCA Civ 1171