Inheritance and Divorce – Is Inheritance Included in a Divorce Settlement?

Assets can transition from being non-matrimonial assets to matrimonial assets.

Upon your divorce, you may wish to argue that your inheritance is a non-matrimonial asset and, therefore, should not fall within the matrimonial pot. 

If the inheritance was acquired prior to the marriage or civil partnership, then the other party in the divorce proceedings may claim an entitlement to it.

Particularly if, throughout the marriage, they benefitted from this inheritance, and it was held in a joint account. 

Conversely, where the inheritance was received following the breakdown of the marriage or during a short marriage, it is less likely to be included in the matrimonial pot and, therefore, the divorce settlement.

The approach of the court is to distribute inherited assets as any other financial resource where the parties’ and children’s needs cannot be met without recourse to it.

If there are sufficient assets to provide for both parties’ reasonable needs, then generally, the inherited property can be kept by the individual who inherited it. 

If the matrimonial assets are insufficient to provide for both parties’ reasonable needs, then the court can take into consideration non-matrimonial assets, which can include inheritance.

In the case of a need, the fact that some of the assets are non-matrimonial property is unlikely to carry much weight. 

If the financial settlement provides for a ‘clean break’ a former spouse will be unable to make a claim against the other spouse’s estate on their death.

Conversely, if the divorce settlement provides for continuing spousal maintenance, then their ability to claim may be retained. 

How can I protect inherited assets on divorce?

If you want to protect your assets on divorce, we recommend having a pre-nuptial agreement drawn up or a post-nuptial agreement if you are already married.

Although not strictly legally binding in England and Wales, the court will consider these agreements when deciding how to divide your assets on divorce. 

Both options allow non-matrimonial assets such as inheritance to be ring-fenced.

As per the landmark case of Radmacher (formerly Granatino) v Granatino [2010] UKSC 42, the courts set out that such agreements are to be afforded appropriate weight, provided certain conditions are met, including that both parties seek independent specialist legal advice.

Alternatively, creating a trust over non-matrimonial assets is an alternative method to protect inheritance.

In a legal trust, a third party is provided with formal control over certain assets on behalf of their owner for a limited duration of time.