Clients often want to know whether their spouse will be entitled to make a claim on their inheritance once the divorce process has started. While there is no single, straightforward answer to this question, this post will try to explain how a Court might decide how inherited assets are to be treated.
Matrimonial v non-matrimonial assets
When you are divorcing and trying to reach agreement as to how your finances are to be divided, you can view your assets as belonging to one of two categories:
- Matrimonial assets: these are assets you and your spouse have built up together during the course of your marriage, and are used as part of your family life.
- Non-matrimonial assets: these are assets acquired either before or after your marriage, and which are therefore not considered part of the “marital pot” of wealth to be split between you.
As a general rule, inheritance is often considered a non-matrimonial asset, particularly if it has been received before or after the marriage. However, there are several factors the Court needs to consider before deciding whether you can effectively “ring-fence” an inheritance.
• When the inheritance was received;
• How it has been spent, if at all;
• The value of the matrimonial assets and whether these can cover the needs of both parties.
Can I ring-fence my inheritance?
If your inheritance was received before or after your marriage (and the crucial question is the date of receipt rather than the date of death of the person from whom you are inheriting), has not been used to benefit your spouse or family (i.e. it has not been intermingled with your other marital assets), and your matrimonial assets are sufficient to ensure both you and your spouse have what you need, it is likely your inheritance will be considered non-matrimonial and not be shared with your spouse.
However, if your inheritance is needed to enable you and your spouse to re-house, for example, the Court has the power to determine that it should be added to the marital pot and taken into account when deciding how to share assets between you.
In any event, even if you ring-fence the inheritance itself, your spouse can argue and the Court can decide that it still ought to be taken into account. That is to say, although the amounts you inherit will not be shared with your spouse, they can still be considered when making a decision as to a fair split of the assets overall; you have more than your spouse in this regard, so they may be entitled to more of something else, for example the equity in your home.
It is important to remember that there is an ongoing duty of full and frank financial disclosure in financial matters, so you should never try to hide or transfer assets, including an inheritance, to try to keep them from your spouse. A Court will take a very dim view of this if discovered.
So, what should I do?
If you have recently inherited, or believe you might shortly, and have started divorce and/or financial proceedings, consult a solicitor to make sure you know how your inheritance is likely to be viewed. The circumstances around inheritance are often complicated, and these will need careful analysis to establish whether you can keep inherited assets out of the discussion around finances.