Is inheritance included in a divorce settlement?

Is Inheritance Included in a Divorce Settlement?

In the UK, inheritance is generally considered a non-matrimonial asset, meaning it’s not automatically included in the pool of assets to be divided during divorce. However, this doesn’t guarantee protection. The court may include inherited assets in a settlement if needed to meet the other party’s financial needs.

The inclusion of inheritance in a divorce settlement is conditional on many variables specific to each marriage. However, it is important to know that inherited assets are not automatically protected or ringfenced from the assets to be shared in divorce.

What Is a Non-Matrimonial Asset?

Assets in a divorce are either matrimonial or non-matrimonial.

• Matrimonial assets, which were acquired during the marriage, go into the pot of assets which can be divided between spouses.
• Non-matrimonial assets, on the other hand, are assets which either spouse acquired before or after the marriage and do not automatically fall in to the pot. Inheritance is classed as a non-matrimonial asset.

When Can Inheritance Be Included in a Divorce Settlement?

While inherited assets are generally considered non-matrimonial and ringfenced, the court may include inherited assets if:

• The needs of the other party or children cannot be met without them.
• The inheritance was used for joint purposes, such as buying a family home.
• The inheritance was mingled with matrimonial assets (e.g. placed in a joint account).

Key case law on inheritance and divorce

• The landmark case White v White, set out that the court will distinguish inherited assets as coming from a “wholly external source” to the marriage and treat them as non-matrimonial. However, this is provided that the needs of the other party can be met without access to the asset. 
• In K v L [2011] EWCA Civ 550, the court excluded the wife’s £57.4 million non-matrimonial shares in a family business from the matrimonial pot for division. The family had always lived a modest lifestyle despite this wealth, and the court held that the husband’s needs could be met without having to take from the non-matrimonial assets.
• The High Court considered inherited assets again in Y v Y [2012] EWHC 2063 (Fam). The court held that the husband’s inherited estate, which made up most of the couple’s wealth, would be treated differently as a non-matrimonial asset. The court again confirmed that inherited wealth does not have to be divided equally, “but its value and the lifestyle that it produced are relevant factors in the court’s consideration of fairness.” 

Summary

When the courts consider non-matrimonial assets, including inherited property, there are multiple factors they must consider when deciding on how those assets should be dealt with. The principle that the needs of both parties must be met is always fundamental. Therefore, if the inherited assets are required to meet the parties’ needs, the court has the discretion to make such an order. However, where the inherited non-matrimonial assets are not required to meet the needs of the other party, Lord Nicholls’ statement in White v White is followed by the courts: “In fairness, where this property still exists, the spouse to whom it was given should be allowed to keep it.” 

Unfortunately, there can be no guarantees when it comes to the ring-fencing of inherited assets. Either way, dealing with non-matrimonial assets such as inheritance can be very complex. If you are concerned about your inheritance and non-matrimonial assets, the best recommendation would be to get specialist legal advice.

Our expert divorce solicitors can help you understand your rights and protect your inheritance during financial proceedings. Contact Vardags today for a confidential consultation.

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Frequently Asked Questions

Q: Is inheritance always excluded from divorce settlements?

A: No. It’s usually excluded, but may be included if needed to meet the other party’s financial needs.

Q: What if I inherited money before the marriage?

A: It’s more likely to be protected, especially if kept separate from marital finances.

Q: Can my spouse claim part of my inheritance?

A: Possibly, especially if it was used for joint purposes or if their needs can’t be met otherwise.

Q: Will the court divide inheritance equally?

A: Not necessarily. The court focuses on fairness, not equal division.

q: How can I protect my inheritance from a divorce?

A: Some tips are to keep it seperate (i.e. avoid mixing inherited funds with joint accounts or using them for shared expenses) and to use a prenuptial or postnuptial agreement to clarify that the inheritance should remain seperate should you divorce.