Inheritance funds in divorce

06 Jun 2013

Inherited assets can attract a great deal of emotional weight in divorce cases. The asset or money usually arrives as a result of bereavement, often from a close loved one.

It has not been "earned" by the individual or by the couple. However, all assets, regardless of their source, go into the matrimonial pot for consideration when a couple split up under the current guidelines.

Many people in this situation have argued before the court that their inheritance should be ring-fenced and not taken into account as part of the overall pot, on the basis that it is not "matrimonial" money – but, instead, that it is a contribution that one spouse has brought into the equation, unmatched by the other spouse

In cases where there are sufficient surplus funds to allow some money to be ring-fenced in this way, a husband or wife might be allowed to retain their inheritance in full or in part it. However, for most couples, the reality of their financial needs going forward after divorce means that every penny counts – including inheritances. In addition, once you start to analyse the finances in terms of "contributions", how do you then decide the value to attach to individual items? Is giving up a paid job to look after children worth more or less than the other spouse’s earning capacity? Is receiving an inheritance more important than having saved into a generous pension scheme throughout the marriage?

One obvious way to avoid these muddy waters is to consider a Pre-Nuptial agreement from a family law solicitor. Such agreements now carry more weight before the Courts than previously, thanks to a case called Radmacher v Granatino. Post-Martial Agreements can also be entered into and if an inheritance is pending or envisaged, a written agreement after marriage that the money/property will be retained solely by the beneficiary and will not fall into the matrimonial kitty could be considered and agreed. As with all discussions about money in relationships, the subject needs to be approached with sensitivity and care.

This article was written by Crystal Stevenson a specialist divorce solicitor in the family law team.