What happens with money or property which has been inherited by one of the parties when they divorce can give rise to uncertainty and very often bad feeling. Will it be matrimonial property falling into the part for division? The answer is that there are no clearly defined rules as to inherited property and the Matrimonial Causes Act 1973 gives judges a discretion as to how the property will be divided.
A judge must as always when called upon to decide a financial settlement consider what is fair and just and meets the long-time needs of both parties following the divorce. If there is little in the matrimonial pot property inherited by one of the spouses may well be called upon to fill it in order to satisfy both parties needs. If the matrimonial assets are of greater value a judge may use their discretion to ring fence one parties inheritance and exclude it from the divorce settlement.
Much can depend upon whether the inherited asset was acquired during the marriage and whether it has been intermingled and used for the benefit of both spouses. If a house was inherited by one partner and used as the matrimonial home a judge is unlikely to exclude this as an asset available for division. The extent to which inherited assets are taken into account will always however depend upon the individual circumstances of the case including the length of the marriage, both parties financial resources and needs and the other factors in section 25 of the Matrimonial Causes Act.
The Court must also take into account prospective inheritances if they are resource that a party is likely to have available in the foreseeable future. Whilst a court can ignore the prospects of an inheritance as being too distant and remote they can increase the award to the non-inheriting spouse to take account of the likely benefit to the other. A further option could be to adjourn for a further hearing when the inheritance vests but the court will usually want to finalise matters.
What is clear is that a judge must take into account inherited property as one of the ‘other financial resources’ to which one or other of the parties has or is likely to have in the future. There can be a distinction between property acquired by gift or inheritance during the marriage and property acquired before the marriage. If the acquisition was wholly external and had nothing to do with the marriage a judge may well consider that it would be fair for the spouse to whom it was given to be allowed to keep it. It would not be considered matrimonial property and the other spouse would have a weak claim to it.
The uncertainty surrounds whether property inherited by one spouse is matrimonial property and if so how much weight should be placed upon how it was acquired. It is certain that inherited assets will not be ‘quarantined’. The court will look at all the circumstances of the case and decide what is fair. If inherited assets have not been touched and incorporated into the family finances they may well be excluded from the ‘pot’ if there are sufficient other assets to meet the other parties needs. However where assets have been used to contribute to the family finances they will be included although the court is likely to allow the spouse credit for contributing them towards the marriage.
Inherited property will therefore be taken into account when considering the assets of the parties. It is in a different category however to other matrimonial assets and may count for little or it may be of great significance. It will be considered as a contribution to the marriage by the recipient spouse but only one of the circumstances of the case. If the inheritance still exists the it may well be fair for the party who inherited it to keep it but the inheritance will not be ring fenced and quarantined. If the other spouse’s needs cannot be met without recourse the fact that the assets was inherited will have little significance.
All will depend upon a judge’s interpretation of all the facts of a case and what is considered fair.
There can never be certainty over the direction in which a judge will jump and if you, your spouse or spouse to be are likely to inherit property or assets it can only be sensible to agree in advance what should happen to them should your relationship breakdown. This calls for a prenuptial agreement if you are yet to marry or a post-nuptial agreement if you are already married. Whilst prenuptial agreements are not binding on the court who must comply with the requirements of the Matrimonial Causes Act they are highly persuasive and will be followed providing what has been agreed is fair and reasonable. If you are already married a post-marital agreement will be just as effective.
