Law Articles

Inherited Assets in Divorce and Civil Partnership Cases 26/06/2024

The Matrimonial Causes Act 1973 and the Civil Partnership Act 2004 do not specifically address inherited assets or future inheritance prospects. However, courts consider inherited assets when making final orders, looking at financial resources, contributions to family welfare, and overall circumstances.

Existing inheritances

Where assets were inherited before or during the marriage/civil partnership, a party may seek to argue that such assets should be ring-fenced. The court takes the view that:

• inherited property (and property owned before the marriage) should not be treated in the same way as property acquired during a marriage
• the other spouse will have a weaker claim to such property
• such property is simply ‘one of the circumstances of the case’ and represents a contribution made to the welfare of the family by one of the parties to the marriage, although the court should take such property into account and consideration should be had to how important it is in a particular case with regard to the nature and value of the property and when, and the circumstances in which, the property was acquired
• the relevance of inherited assets may carry little weight, if any, where the other party’s financial needs cannot be met without recourse to such property.

An argument may be made that inherited property is non-matrimonial, but such assets will not be excluded from the court’s view entirely, i.e. they will not be 'quarantined'. The assets may be looked on as an unmatched contribution by the beneficiary of the inheritance. The court will then decide whether the inheritance should be shared and in what proportions.

In short marriages and civil partnerships, contributions of any kind are more likely to be relevant. In a longer relationship, the parties’ finances will inevitably be more entangled, and it will be more difficult to successfully draw a distinction between different categories of asset by reference to the source of an asset.

In most cases, all the resources available to the parties, regardless of their source, will be needed to enable the parties to make two households out of one. The court takes the view that, for most, the search for fairness begins and ends with an attempt to meet the parties’ financial and housing needs.

Inheritance prospects

By virtue of the Matrimonial Causes Act 1973 and the Civil Partnership Act 2004, the court may have regard to ‘...other financial resources which each of the parties to the marriage has or is likely to have in the foreseeable future’.

Where a party may expect to receive property on the death of a third party, the other party may argue that the court should take this property into consideration when assessing that person’s ‘other financial resources’. The court has been unwilling to attach much weight to the existence of property that a party may inherit because it is uncertain whether their expectations will be fulfilled. Only on rare occasions will it consider property a party expects to inherit in the foreseeable future.

Summary

While inherited assets and future inheritance prospects are not specifically addressed in the Matrimonial Causes Act 1973 or the Civil Partnership Act 2004, they play a significant role in divorce and civil partnership dissolution cases. The courts approach inherited assets with a nuanced perspective, acknowledging their distinct nature compared to marital property. Although such assets may be ring-fenced to some extent, they are not entirely immune from consideration, especially when financial needs must be met. The longer the marriage or partnership, the more intertwined the finances, making it challenging to segregate inherited assets from marital wealth. Ultimately, the court's primary focus remains on achieving fairness by meeting the financial and housing needs of both parties, ensuring that the division of assets supports the creation of two viable households.

For further information and advice on this issue, and other family law issues, please contact us for a free initial consultation on 01992 306 616 or 0207 956 2740 or email us.