How divorce impacts inheritance: What to know

Concerns often arise about what happens to inherited assets or future inheritances on divorce, understanding how divorce can affect inheritance is important.

What Is Classed as Inheritance?

The inherited assets may take many forms including cash, investments, land or buildings as they may have been in the family for generations.

It is understandable to feel that inherited assets should not have to be shared with a spouse, especially where a relative intended the benefit to go to one person alone.

The principles applied by the court are not always straightforward, but understanding the key issues can help clarify your position.

How Courts Treat Inheritances Received Prior to Divorce

How the court is likely to treat an inheritance on divorce largely depends on whether the court classifies the inheritance as a matrimonial or non-matrimonial asset.

This classification is important because the court will normally take the view that matrimonial assets should be shared equally between the parties.

Whether or not the court will classify a particular asset as a matrimonial asset depends upon the facts of the individual case.

An asset inherited from a family member is more likely to be treated as a non-matrimonial asset, the source of the asset is an important factor for the court.

Reception of Inheritance: Matrimonial or not?

Another important factor is when the inheritance was received. If it was received prior to the marriage or after the separation, it is less likely to be viewed by the court as a matrimonial asset.

Another factor is whether the asset has been mixed with matrimonial assets. For example, using inherited money to buy a property in joint names, where both spouses benefit from the income, may affect how the court treats the asset.

In such cases, the court may decide that the property is a matrimonial asset because the inherited funds have been mixed with joint assets.

If the court finds that the inheritance is a matrimonial asset, it will usually be shared between both parties, with equal division as the starting point.

Even where an inherited asset is not classed as matrimonial, the court may still use it to meet the needs of either party or any children.

Principle of Need

One of the most important principles which is applied by judges when they are deciding how to divide the assets between parties on divorce is the principle of “need”.

The court aims to ensure that the financially weaker party, often a parent with young children, receives enough to meet their needs for housing and living costs.

If an equal split of matrimonial assets does not meet needs, the court may increase the share from non-matrimonial assets or award a portion of a non-matrimonial asset.

“What About Future Inheritances?”

Sometimes, a party may ask the court to consider the other party’s possible future inheritance when dividing assets.

The court will rarely consider a potential future inheritance, even if one party has an elderly or unwell parent.

How to Protect Inheritance?

To protect an inheritance received during marriage, keep it separate and in your sole name, avoid mixing it with matrimonial assets or sharing it with your spouse.

A Prenuptial or Postnuptial Agreement can also help; this should state that your inheritance is your separate property, remains under your control, and is not to be shared if you divorce.

If the Nuptial Agreement meets the needs of the other party and any children, and the correct procedures are followed, it should be effective in protecting your inheritance.

How Divorce and Inheritance Issues Can Overlap

Inheritance can often become linked with divorce and family law.

These areas of law often overlap, especially when dividing assets or planning for the future.

For example, if someone inherits property and said inherited property is placed in joint names, it may be treated as a matrimonial asset. If a will is not updated after divorce, there may be questions about whether a former spouse should still benefit from the assets.

Such as:

● A divorce settlement may need to consider if one party is relying on an expected inheritance, even if it is uncertain.

● After divorce, disputes over probate may occur if someone feels excluded from an estate they expected to benefit from.

Understanding these overlaps helps explain why courts adopt a flexible approach when dealing with inherited assets during divorce.

It also highlights the importance of careful planning, from keeping inherited wealth separate to ensuring wills are kept up to date, to avoid disputes in the future.

How Can I Ensure That My Former Spouse Does Not Inherit From Me On Death?

After divorce, it is important to make a new will or review any existing will.

When the Final Order of divorce is granted, the will is treated as if your former spouse had died on that date, so any appointment of them as executor, trustee or beneficiary will not take effect. However, it is best to set out your wishes clearly in an up to date will.

You will need to ensure that any Financial order made within the divorce proceedings contains a “clean break on death”.

The Inheritance (Provision for Family and Dependants) Act 1975 enables certain categories of people, including spouses and former spouses, to make applications against the estate of a deceased person, if the deceased person has not made provision for the spouse/former spouse in their Will.

The right to make such an application must be dismissed by the Financial Order. This is a fairly standard clause which should be included in the Financial Remedy Order by your solicitor here at Orwins as a matter of course.