The question as to what approach should be taken to inheritances a husband or wife might have received when they divorce is incredibly common. It will often lead to disagreement between the spouses and can sometimes be the focal point that leads to the divorce taking a long time to conclude.
Against that, how such claims are resolved can be incredibly high stakes. The level of the inheritance in question will often make it proportionate to either pursue or defend, depending on your situation.
There is often a great deal of misunderstanding around the approach that should be taken to inheritance on divorce. This confusion can sit with both clients and solicitors alike.
The position in law in relation to inheritance can be distilled down into a number of key points.
Matrimonial and Non-matrimonial Property
To understand how inheritance is treated, first requires a basic appreciation of matrimonial and non-matrimonial property, and how they are each treated on divorce.
Matrimonial Property
At its most basic, matrimonial property is the term given to capital that has been generated between the date a couple begin cohabiting seamlessly into their marriage, through until the date they separate. This can sometimes account for the entirety of the capital on a divorce. After short marriages in particular, it can lead to very little in the way of matrimonial property being held. The family home (i.e. the home occupied by the husband and wife regardless of how it is owned) would also tend to fall under the heading of matrimonial property.
Matrimonial property is routinely shared between a couple equally. The main exception to this is where an unequal division of matrimonial property is needed to adequately cover off a couple’s needs or the needs of any minor children they have.
Non-matrimonial Property
In contrast, non-matrimonial property is the capital a couple might each have which has been generated either before the couple begin cohabiting, after they separate or which has been inherited or either of them (regardless of when that inheritance occurred).
Claims against non-matrimonial property should only succeed if they need to be pursued in order to meet either party’s reasonable needs or the needs of any minor children of the family.
Mingling / Matrimonialisation
It is possible and incredibly common for non-matrimonial property to inadvertently be converted into matrimonial property and to therefore expose it to that sharing claim. This most commonly occurs through it being used to pay down a mortgage on a family home. It can also commonly occur through it being put to joint expenses more broadly or sometimes being paid into joint accounts or even an account in the name of the other spouse.
This conversion of non-matrimonial property is known as matrimonialisation or mingling.
The application of these principles to inheritance
- Any inheritance is going to begin life as non-matrimonial.
- If that inheritance is applied towards paying down a mortgage, purchasing a family home, or otherwise put to joint use, it will arguably have been matrimonialised and therefore be potentially shareable on divorce.
- Even if it is not matrimonialised, where an equal division of the matrimonial property is insufficient to meet either spouse’s (and/or the children’s) reasonable needs, the inheritance can be used to meet that shortfall.
The best advice if you are seeking to preserve inheritance is therefore not to transfer it or pay down a mortgage with it. Obviously, the converse is true if you are seeking to have it taken account of in any divorce. These considerations are however secondary to any needs shortfall left through the equal division of matrimonial property.
What are needs?
The prominence of needs in any divorce differs from case to case. If a couple have children who are minors then it will be focussed on ensuring the need of those children can be met whilst they are under the edge of 18 or in full-time secondary education. The longer marriage is, the more rooted and focused the needs claim is likely to be, whether or not the couple have children together.
Example 1 – a long marriage
Consider a couple who have been married for 40 years and have two adult children. Whilst there are no minor children family, that 40 year period provides a large period of time for matrimonial property to accrue. The sharing principle would apply to that matrimonial property pool. The long marriage also better establishes a marital standard of living and a delineates a template to consider if they can be afforded post-divorce. That needs claim will likely cover off a reasonable size property, depending on the degree to which it can be afforded either from matrimonial or non-matrimonial property and a good income to provide for a good retirement.
Example 2 – a short childless marriage
After a short marriage with no minor children, whilst there is the potential for a claim against non-matrimonial property to be brought, that risk is much lower in most cases. The relationship is less established, the period over which the marital standard of living has been enjoyed is that much shorter and the matrimonial property pot is likely to be that much less, often limited to little more than a share of the equity in the family home.
Example 3 – short marriage with children
Contrast that with a very short marriage with young children. The matrimonial property window (i.e. the period during which that matrimonial property could be said to have accumulated) is again likely to be short. In spite of this, there could be up to 18 years during which the reasonable needs of the minor children have to be met. If the only resource from which those needs can be met is non-matrimonialised inheritance, then the court would have no hesitation in requiring that non-matrimonial property to be utilised to ensure the children’s needs can be met.
Should I Concede to my Spouse Retaining Their Inheritance?
This the answer to this question will likely turn on where your scenario sits as against the outline provided above to include the following questions:
- How large is our matrimonial property pool and what does it comprise?
- How has the inheritance been treated since it was received?
- What are our needs, both in terms of housing and income needs, both now and in retirement?
- Are we each able to meet those needs and those of our children from a half share of our matrimonial property?
- Do I have non-matrimonial property that might otherwise offset the inheritance my spouse has?
The treatment of inheritance on divorce can in some instances be make or break. It is important the approach taken is legally correct, to avoid unnecessary time and costs being wasted seeking to defend it.
The best advice is to take advice from a specialist divorce and finance solicitor, before decisions are made that may be difficult or impossible to undo. Please get in contact with our Family Law team if this is something you require advice for.