Is my ex-spouse entitled to a share of my inheritance on divorce?
You might expect that an inheritance received during your marriage, for example from a relative, will be excluded from the marital pot on divorce. But this isn’t necessarily the case, as I examine in this blog.
The assumption is that an inheritance received during marriage is intended to benefit the family and not just the individual.
The basic rule is that money you inherit during your marriage is not excluded from the assets that are divided between you and your ex on divorce. But this is not cut and dried and in certain situations an inheritance will fall outside the marital pot.
The starting point when the court determines the financial settlement is to ensure that the needs of each party are met. Certainly, if these needs can only be met by including the inheritance, the court will include it.
In the case of GS v L (Financial remedies: Pre-acquired assets: Need), the husband tried to argue that £1.5m of the couple's £4m of assets should be excluded as he owned them before the marriage. The judge rejected this saying it was not necessary to consider the "vexed question" of whether those assets were non-matrimonial, since they were needed to meet the needs of the parties and their children.
In coming to its decision whether to include inherited assets, the court will take into account a number of other factors.
When was the inheritance received?
If the inheritance was received prior to marriage, how was it dealt with? Did it sit in a separate account or go into a joint account? If it was the latter, there's a strong presumption that it formed part of the marital pot as it will have become intermingled with the couple's other funds. Even if it was held in a separate account it may still form part of the marital assets. The best way to establish to a court that the intention was to ring-fence it, would be to enter into a pre-nuptial agreement.
If the inheritance is received during marriage, it is more likely to form part of the marital pot. The assumption is that an inheritance received during marriage is intended to benefit the family and not just the individual.
In the case of Norris v Norris, the wife argued that £373,000 of inherited property should be excluded from her assets. The judge determined that the court must take into account all property, including property acquired during the marriage by inheritance.
What if the marriage is short?
If the marriage is short, it is less likely the inheritance will be included with the marital assets.
The question of how assets are divided on divorce (and what is considered a short marriage) was considered in the Court of Appeal in the case of Sharp v Sharp last year. Although this case didn't deal specifically with inherited wealth it did deal with how a marital pot is divided.
In this case, the couple were in their early forties and had been married for six years. They had no children. Their assets at the time of divorce were £7m, of which about £5.5m had been acquired during the marriage. This was largely due to bonuses received by Mrs Sharpe of £10.5m.
At first instance, the court awarded Mr Sharpe £2.75m, half the family assets. On appeal by Mrs Sharp, this was reduced to £2m.
The court said: "An automatic or blind application of a 50/50 split in every case can only be an impermissible judicial gloss on the statute, which expressly requires the court to consider all the circumstances of the case."
The Court of Appeal said that Mr Sharp had made no domestic or business contribution to Mrs Sharp's bonuses. In addition, the marriage was short, there were no children and they kept separate finances. Accordingly, it was justifiable to depart from the equal sharing principle.
This decision emphasises how important the circumstances of each case are, something that is relevant in settlements involving inherited wealth.
What if the inheritance is received after the marriage has broken down?
In this situation, the court is more likely to exclude it from the marital pot. The exception to this if it is substantial and would have a significant impact on the financial settlement.
If you would like to discuss an issue relating to divorce, please get in touch with me at [email protected].