An issue that often arises in the resolution of financial matters on divorce is how any inherited assets should be treated.
Should the spouse who inherited the assets automatically be able to retain those assets themselves without sharing the inheritance?
Unfortunately. the reality is that there is no single answer. It depends on all the circumstances of the case including:
- How long the couple have been married;
- How much the inheritance was;
- When the inheritance was received;
- What the inheritance has been used for;
- The couple’s standard of living (including whether the inheritance has assisted with that standard of living);
- Any pre-nuptial or post-nuptial agreement entered into by the couple; and
- The individual needs of the couple and any most importantly any children.
It is therefore essential that early advice is taken in the event of the breakdown of a marriage, or at the time of the receipt of an inheritance (if there is concern about the viability of a relationship) so that the specific circumstances can be considered.
The Court has a very wide discretion in matrimonial cases and has made it very clear that each type of inherited property can be treated differently, depending on the circumstances. For example, an inherited farm, shares in a family business, or an heirloom that has passed down through the family for generations, may well be treated in a different way to an inheritance of money. The Court will look at what is “fair” and this will vary in each case.
In long marriages, there is a presumption that the Court will divide the assets equally. An inheritance provides an opportunity to seek a departure from that presumption.
To secure the best possibility of preserving any inherited assets from a spouse’s claims on divorce it is helpful to:
- Keep the inherited asset in your sole name i.e. keep property in your name only, keep funds in a sole account etc;
- Try not to use the asset for joint benefit during the marriage;
- Enter into a pre-nuptial or post-nuptial agreement to ring fence the asset; and
- Take advice as soon as possible in the event of a marital breakdown.
For more information on inheritance and divorce, please see our video:
How is Significant Inherited Wealth Dealt with During Divorce?
For advice, please contact our Family team.