For many people who are considering the financial fallout of divorce, matters of inheritance are often a source of worry. How are assets like these divided? Do you have to share inherited assets? Can you or your partner stake a claim over future inheritances? And where do the kids come into this? That’s why, for this week’s blog, we outline what’s likely to happen to your inheritance if you divorce – and what you can do to protect it.
First thing first, here’s how assets are generally divided in divorce.
Assets gained during the marriage are known as “matrimonial” assets. This means they are usually regarded in law as equally belonging to you and your spouse, and are therefore put into the “pot” to be divided up between you if you divorce. This includes property, earnings and pension acquired through work.
Divorces are settled on a case-by-case basis, so the judge’s decision will ultimately depend on your individual situation. The first priority for the judge will be that the needs of the family are met. Often, if the pooled matrimonial assets are enough to cover the needs of both parties and the children, then non-matrimonial assets such as inheritances could be left out of the split.
So, what is likely to happen to your inheritance? In addition to the needs of the family, the judge’s decision will depend on when it was received, what you did with it and how much it is worth.
Previous inheritances
These may or may not be classified as a matrimonial asset, depending on what you and your spouse did with it while you were married. If you transferred it into a joint account and used it towards the purchase of a family home, for example, it’s likely that this would go into the pot.
On the other hand, if you received your inheritance before you got married and it has always been kept separate, it’s more likely that the judge will not bring this into the equation. But again, the needs of the family are a primary concern, and if the judge deems it necessary the inheritance may have to be divided.
Expected inheritances
In most divorce cases, expected future inheritances are not considered when deciding on the settlement. However, it’s worth bearing in mind that this does not mean that your ex is prevented from staking a claim over future inheritances later on. If you are concerned about this possibility, it is a good idea to take out a consent order.
If someone passes away during, or prior to, divorce proceedings and you are due to receive a share of their estate, it is possible that the court proceedings could be adjourned until the funds have come through so that they can be considered in the settlement.
How can I protect my inheritance?
If you are wondering what you can do to protect your family’s assets in future, there are a few different options to consider.
Pre- and post-nuptial agreements have become increasingly popular in recent years, and can go a long way towards protecting your inherited assets. The judge can always override a pre- or post-nup if it is deemed necessary in order to meet the needs of the family, but generally they are upheld as a guide to who gets what in the event of divorce.
If you expect to inherit assets in future, it is a good idea to look at trusts and estate planning with your relatives. Having a carefully considered estate plan in place can ensure that family assets are kept secure in the event of a divorce.
Finally, it is important to think about obtaining a consent order upon divorce. This is a document that formally settles all financial obligations and prevents either party from opening up matters in the future. The agreement must be signed by both parties and is legally binding.
The treatment of inherited wealth in divorce can be complicated - it’s crucial that you take professional advice when dealing with matters of divorce and inheritance. At Crisp & Co, our divorce solicitors will be able to advise you on the best course of action depending on your individual circumstances. For more information or to find out how we can help, get in touch today on 0203 857 9885 or send us an enquiry via our website.