The date of inheritance and the impact in financial remedy proceedings revisited

Following on from Alexandra Johnson’s article on when inheritance may be taken into consideration in the division of the matrimonial finances. Claire Howard, Associate Solicitor at Family Law Group examines a recent case in which, her client inherited property prior to separation but this was still found to be non-matrimonial.

The issue of inheritance impacts on whether it is deemed to be matrimonial and therefore subject to the sharing principle or non-matrimonial and as such, not necessarily subject to the sharing principle. Although each Judge/Arbitrator can apply the Law at their own discretion, the case law is fairly clear that assets accrued prior to the marriage, or during the marriage but from funds external to the marital partnership (such as inheritance), would fall within the concept of non-matrimonial property (JL v SL (No. 2) [2015] EWHC 360 (Fam)) unless they have been “mingled”.

The question that then arises is whether the inheritance has been mingled into the matrimonial pot and used to benefit the family. If the inheritance is mingled into joint funds and/or used towards the benefit of the family by, say, paying towards the mortgage or purchasing a property then the inheritance would likely be found to have been effectively ‘matrimonialised’. It therefore is often the case that if the inheritance was prior to separation then the family would likely naturally have benefited from it unless it is kept completely ring-fenced with no funds from the inheritance being paid into the marriage.

It is therefore imperative that any inheritance, whether inherited before or after the date of separation, is kept separate from all matrimonial assets if you want to protect it on a later divorce.

That is not to say that if the inheritance is found to be non-matrimonial that it cannot be subject to the sharing principle if the circumstances of the case make it unfair not to share the same. For instance, if the case were to be considered on the parties’ respective needs and such needs simply could not be met from the matrimonial assets, then the non-matrimonial assets may need to shared. Certainly, even if the inheritance is deemed to be non-matrimonial then there is still discretion to share the same in order to achieve a fair outcome having regard to the relevant Section 25 factors within the Matrimonial Causes Act 1972 (Hart v Hart [2017] EWCA Civ 1306).

One way to potentially avoid inheritance issues arising would be to enter into a pre-nuptial agreement before marriage or a post-nuptial agreement after marriage if inheritance is anticipated. Detailed advice would be needed in relation to entering into any such agreement.

For further specialist advice on divorce and finances or any other separation matters, please contact Claire Howard on 01908 787900 or email claire.howard@familylawgroup.co.uk.