Divorce and the financial
negotiations that ensue are already difficult creatures for clients to have to
face in the aftermath of a separation but add to that inherited assets or
wealth and you have a more complicated situation.
Leaving aside the added
emotion that comes from the feeling that money or property handed down from
parents or family members is at risk of going to your ex-spouse, how those
inherited assets are dealt with by the Court will also be up for discussion.
What is clear from case law
is that inherited assets or wealth are “non-matrimonial” by their nature. That
distinguishes them from “marital assets”, which are those accrued during the
marriage by the effort of one or both parties jointly and commonly include the
former marital home, savings, pensions, investments etc. etc.
There may be arguments of
course that some assets though accrued within the marriage were built as a
result of a special or stellar contribution from one party alone.
The importance of
distinguishing inherited assets as “non-matrimonial” is that this class of
assets is not subject to the normal “sharing principle” that marital assets are
i.e. there is no entitlement by one spouse to an equal share of the other’s
Sounds great! Surely that
means my inheritance is safe!
If all in family law were
that clear cut the Court wouldn’t have the wide discretion that it does and
litigants in person would be in a much better position.
The fact is that whilst the
Court has been clear that inherited, non-matrimonial property is not subject to
the normal “sharing principle” it will not be discounted entirely.
Firstly, we must look at
whether there has been any “mingling” with marital assets i.e. part of an
inheritance used to pay off the mortgage on the marital home or purchase the
marital home outright. Any money mingled with a marital asset (which the
marital home is, however it was purchased) has the effect of diluting the
“non-matrimonial argument” and the payer may have to accept that those monies
have been taken into the “pot” for sharing (in which case he/she may have to
rely on arguing that their greater financial contribution should give them more
of a % settlement).
If inherited monies have been
kept separate and apart and identifiable i.e. in separate savings/investment
accounts then the Court may also look at the timing of the inheritance and
whether the family has been used to drawing any income from the assets, in the
case of investments or shares.
Ultimately, the Court will
come back to look at the needs of the parties. Even if you have been successful
in establishing that assets are inherited and therefore non-matrimonial the
Court will invade those assets if that is the only way in which the needs of
the other party can be met.
This was very recently
evidenced in the case of YvY, in which the husband had a landed estate worth
about £26m. The marriage was 26 years long. The wife was awarded 32.5% of the
assets which the Court felt fairly met her needs. The Court made comment about
sharing and felt that, taking into account the origin of the wealth, the award
that they had settled on met not only her needs but also was fair in terms of
any entitlement to share.
In the end, the needs of the
parties tends to trump all other arguments and this recent case shows that, even
in big money cases, needs arguments can be key to settlement.
Ultimately, the Court retains
its discretion as regards inherited wealth and assets and the way in which it
takes such assets into account in any particular case so there can be no absolute