How Can I Protect Inheritance in a Divorce?

Within a divorce it is not unusual for one or both parties to have or had some inheritance. Understandably, if you separate, it can feel unfair for any part of that inheritance to be included in your divorce settlement.

At the outset of your divorce there will need to be a process of gathering together financial information. This will include finding out about money either of you have introduced to the marriage over the years and what you did with that money. This information can be crucial in relation to how that money is treated in your divorce. There is a distinction between "marital" assets and "non-marital" assets. The home you live is, in the majority of cases, determined as "marital" even if it is only owned in one spouse's name. Any joint assets are of course "marital." Assets held in separate names which have not been treated as joint can arguably be "non-marital." This can of course include inherited cash or properties.

"Non-marital" assets still have to be disclosed during a divorce and if necessary subject to valuations (in the case of a property). These assets can still be included in the divorce settlement, but the general approach is they are only included in "needs" cases. This means they usually only come into the settlement if there isn’t enough money from "marital" funds to ensure you are each adequately provided for (housing/car/income needs). Even if they do not form part of the settlement, arguments can be made that the spouse who has the inheritance has access to those funds as a resource to meet their own needs now or in future.

You can of course enter into a Pre or Post Nuptial agreement with your spouse if you have or are due to receive inheritance recording the fact that the inheritance would not form part of your asset split in the event of a divorce. Provided such agreement is fair and various criteria met, the court would usually uphold the terms of such an agreement in a subsequent divorce.

In the absence of a Nuptial agreement, the best way to protect your inheritance from future divorce is to ensure it is kept separate from joint assets and not used for joint benefit. For example, using cash inheritance to pay off a joint mortgage is clear evidence of intention to "mingle" your inherited money with joint assets and the presumption will therefore be that this money should be shared. Keeping the cash in an account in your sole name will place you in a much stronger position to argue the money is "non-marital." Holding a property in your sole name but both of you using it for joint benefit (for example as a holiday let) could again be evidence of this asset becoming "marital."

Of course, regardless of the legal position, it is open to you and your spouse to agree that any inheritance should be protected in your divorce settlement. Any agreement must be incorporated in a court order called a "consent order" to ensure it is legally binding. This can be obtained on a paperwork basis without having to attend court. 

For more information or advice on your situation please call Family Law Partner Emma Lawler on 01522 542211.

Photo by Towfiqu barbhuiya on Unsplash.