Is future inheritance considered in divorce settlement?

Future Inheritance and Divorce

Divorce can be challenging and emotionally charged, particularly when it comes to the division of assets. Deciding who gets what when it comes to property, pensions, business interests, etc. may seem complex enough. However, another asset class that might not immediately come to mind but can potentially impact divorce settlements is future inheritance. Inheritance can be a significant financial asset, and many individuals wish to ensure that their inherited wealth remains protected, especially in the event of a divorce.

In this article, our talented family lawyers at Tyrer Roxburgh Solicitors explain how the courts tend to treat inheritance in divorce settlements, both concerning inheritance already received and anything expected in the future. We highlight the circumstances in which the court may take the value of one spouse’s inheritance into account in a divorce settlement, and how you can help minimise such risks.

If your relationship has ended and you are concerned about your inheritance, make a fixed fee family law appointment for some initial advice.

Matrimonial assets v. non-matrimonial assets

Firstly, distinguishing between matrimonial and non-matrimonial assets is key to understanding your position. Assets built up over the course of the marriage, shared and enjoyed by both parties are considered to be matrimonial assets. Matrimonial assets make up the marital pot, which the court aims to divide fairly between divorcing couples in financial settlements. Non-matrimonial assets, on the other hand, are personal to the individual owner and generally not taken into account. Whether or not inheritance will be treated as a matrimonial asset depends on when it was inherited, how it is treated, and what the financial needs are of both parties.

Inherited assets in a marriage

Any assets brought into the marriage, or inherited by one spouse during the marriage, can usually be retained as non-marital assets. This includes any money, property or valuable goods gifted to you by a relative. What you do with that inheritance may, however, change things. For example, if you inherited a large sum of money and kept it in a separate account, then it is more likely to be ring-fenced. On the other hand, if you invested that money in renovations for your marital home, it is more likely to be subsumed into the marital pot.

A key point to bear in mind here is that even if you keep your inherited assets fully separate, they are not completely safe. The court might take property inherited by one party into consideration if the other’s needs cannot be met by what’s already in the marital pot. This does not necessarily mean that you have to share your inheritance with your former spouse. However, your former spouse may be awarded a greater share of other matrimonial property to make up for it.

Future inheritance in divorce settlements

Like inherited assets during the marriage, future inheritance is not usually taken into account in divorce settlements. This includes money or property that a relative plans to gift you while they are alive as part of estate planning, or under a will. That said, the usual position may change to accommodate the financial needs of both parties. It might seem odd that your former spouse can partake in inheritance you have not even received yet. However, the courts can view it as a resource available to one party that can help balance the matrimonial pot where needs justify. This is especially so in the case of substantial and imminent sums.

Implications of being separated but not divorced

If you are living separately but not divorced, you are in a stronger position to argue that any inheritance you receive has not been accrued with matrimonial assets. Additionally, where both parties have been living separately, independently and comfortably for some time, there is less likely to be a financial need to claim against future inheritance. That said, all former married couples, whether living under a separation agreement or fully divorced, are open to claims by their former spouse until a legally binding divorce settlement is in place. For complete financial closure and peace of mind about any future inheritance, you need to obtain what is known as a ‘Clean Break Consent Order’.

How to protect inherited assets and future inheritance

There are steps you can take to minimise the risk of exposure, some of which we have touched upon above, including:

1. Separating Inherited Funds: Keeping any inheritance you receive completely separate from your matrimonial assets. Avoid mixing your inheritance with shared funds e.g. a joint bank account.
2. Record-keeping: Maintain clear records of all documents related to the inheritance, such as wills, transaction records, and correspondence from the estate. This can serve as evidence of the origin of the funds and show that they are separate from any marital assets.
3. Pre and Post-Nuptial Agreements: If you are considering marriage or are already married, a pre or post-nuptial agreement can be a useful tool. These agreements can explicitly state how inherited assets will be treated in the event of a divorce.
4. Estate-Planning: Specialist wills and trusts lawyers may be able to put in place added layers of protection to help preserve your inherited wealth in the event of a divorce. This may involve transferring assets or the use of trusts.
5. Legal Advice: Everyone’s situation is different, and what might suit one person may not be appropriate for another. It is therefore prudent to get expert legal advice about your options and strategies tailored to your circumstances.

Summary: Is future inheritance considered in divorce settlement?

While inheritance is generally not considered to be a matrimonial asset, there are exceptions. The intermingling of assets inherited by one party with joint property can often result in it being lost to the marital pot. In addition, gifted or future inheritance may be accessed to ensure both parties’ financial needs are met in divorce settlements.

To protect your assets, including any future inheritance from exposure to financial claims, it is best to get a clean break consent order in place with your former spouse. If you are worried about future inheritance and divorce settlements, our skilled and compassionate family law team at Tyrer Roxburgh Solicitors is on hand to help.