It is natural to want to protect an inheritance that comes to you from you own family who would not usually want it to be given to your spouse if the relationship had failed.
See Matrimonial Property or Not? to understand in detail when and why it makes a difference as to whether an asset is either matrimonial or non-matrimonial.
Matrimonial assets are fully taken into account for sharing on divorce, whereas non-matrimonial assets may be treated differently and are more likely to be retained by the person owning them.
The key to having any chance to protect an inheritance is making it a non-matrimonial asset and timing is crucial for that: once you are separating, the court will look at what resources you have then, so it may be too late to create that distinction at that point in time.
What should I do if I want to have a chance to keep my inherited non-matrimonial property?
The two most important processes will be to Separate and Document the nature of the asset and its history.
Key Tip 1 Separation
- Keep your inherited assets separate from joint marital assets
- Avoid mingling inherited funds with joint accounts
- Do not use assets for meeting joint or family needs
Key Tip 2 Documentation
- Retain copies of Wills or letters that mention gifts of money and why they were provided
- Keep records of transactions involving cash / savings / investment accounts to show that they have not become mingled with other resources
- Do not allow any inherited assets to be seen as ‘family’ property
What can be done in advance of divorce to keep inheritances separate?
It is possible to agree financial arrangements in advance of any problems in the relationship and some countries require that people agree the distribution of their assets BEFORE they get married.
Those agreements are called Pre-Nuptial Settlements or Agreements often called a ‘pre-nup’. It is commonplace for wealthy people with family estates to agree how they should be retained and not divided if the marriage does not work out: it is inherently practical to do that and also can be positive as the person in weaker financial circumstances is then not seen suspiciously as a ‘chancer’ or ‘gold-digger’ which can help relations.
A pre-nup is often a good idea when spouses marry later in life and have children for whom they want to provide and who might be hostile to a step-parent for that reason.
Is it too late to do anything if we did not think of a Pre-Nup before getting married?
No – it is not too late to seek to have some clarity and agree what should happen were the relationship to eventually break down.
Whilst couples often find it emotionally challenging to agree what should happen were they ever to separate, the advantage of having that expectation – for example about housing or security of income is actually positive and removes an element of fear, both for a weaker party or for a wealthier party who then does not expect to be ‘taken to the cleaners’. A win-win if done well.
There are criteria for Agreements to be upheld and followed by a judge on divorce which primarily relate to disclosure, fairness and having legal advice. All of those criteria are there so that it can be seen that there was informed consent to the provision in that agreement and that what was envisaged was intended to be fair.
Is there anything else I could do to help retain an inheritance?
An inheritance that has not been received during the marriage has more chance of being treated differently than one that has been received before the separation.
If the inheritance is part of provision for a number of people, it may be lawful to divert some of that inheritance to other family members or to forego some rights in order not to share them in a way that the Testator might not have approved. Anything such as that should be discussed with an expert Wills/Probate lawyer and a divorce lawyer before any changes to entitlement are discussed in any detail.
It may be possible to use a trust to remove an inherited asset from being directly shared, but transactions made with the intention of defeating making provision for a spouse or former spouse may be undone or added back in by a judge to it is an aspect that needs careful consideration with the help of a specialist lawyer.
What is the best practical advice for seeking to retain an inheritance?
Apart from making sure that the other assets will be able to meet all your reasonable needs without looking to the inherited wealth which is the nearest the law would make to guaranteeing that an inheritance is unscathed, there are some practical measures which support that approach.
Firstly having an Agreement in advance which meets the qualifying criteria for being upheld is the strongest argument for keeping an inheritance separate.
Secondly, if there is no agreement to do that, ensure that an inheritance is documented and kept separate from other matrimonial assets.
Thirdly, if you split up, try to agree what is fair as soon as possible – whether by private negotiation (with the assistance of lawyers or mediators) or through having expert family-law solicitors manage the negotiations directly. Even better if the arrangements can be agreed before an inheritance is received.
In all cases seeking advice from a specialist family law solicitor is important and in legal matters, the detail and doing the best thing is far wiser than trusting to luck or that the judge will exercise discretion entirely in your favour.