mingling assets

When somebody already has money when they marry, or subsequently receives money or any other asset from a third parry outside their marriage, careful thought should be giving as to how to deal with it.

An obvious example is where someone receives an inheritance and they use those funds to pay off the mortgage on their jointly owned home. If this is done, it can turn the inheritance (which is potentially non-matrimonial) into a joint asset and can be treated as such on a subsequent divorce. Another example is where advice is given to transfer a rental property owned prior to a marriage into joint names, or the name of the other spouse for income tax purposes. Again this can change a potentially non-matrimonial asset into a matrimonial asset.

How does the Court view “mingling” assets?

There is always a balance between tax and other efficiencies on the one hand and protecting what you have on the other. The court, when looking to divide assets, first addresses the couple’s and minor children’s needs. At this stage it does not usually matter where the asset originates – it can be a resource used to meet needs.

If there is more than sufficient in the pot to cover everybody’s basic requirements and needs, the source of the asset then becomes critical when assessing whether it should, or should not, be shared. At this point something inherited and kept separate from the family assets is far more likely to remain with the person who received it and be ring-fenced from the sharing exercise.

Protecting inherited assets in divorce

If you want to ensure anything inherited remains available to you alone, you need to keep it in your sole name or recognise the implications of putting some or all of any assets into joint names. The practical advice is that if you receive an asset from outside the marriage or your own endeavours, always think twice before turning it into something joint with your spouse.

One of the ways to help prevent this from happening is by putting in place a pre or post-nuptial agreement.

Next steps

If in any doubt about what to do with something you receive, contact us to talk through the options so you can protect your position. There are always a number of possibilities we can explore with you.

But be aware that mingling without thinking or taking advice can be extremely disadvantageous in any future divorce.

This article is part of a series on inherited wealth and the benefits of pre and post-nuptial agreements: