Inherited assets and divorce
We often get asked questions relating to divorce and inheritance, such as ‘what happens if I inherit assets when I am going through a divorce or if I am already divorced? Is my ex entitled to any of it?’.
The topic of divorce and inheritance can be quite complex and we shall try and clarify this for you in this blog, as understandably this topic is very important to many of you.
Inheritance refers to assets such as property, savings, belongings (essentially anything representing monetary value), which constitute a person’s estate, being ‘left’ to a group or sole individual, once they are deceased. Any debt accrued by the deceased would be recoverable from their estate and is therefore not ‘heritable’. We have outlined the divorce process below, and where a financial order and inheritance fits within this process.
*Note: All references to divorce below, apply equally to dissolution
The divorce process:
We’ve written a full guide on the divorce process which will provide you with more information, however here is an overview below:
- Step one : The divorce/dissolution petition is submitted by the Petitioner
- Step two : The Respondent is able to review and respond to the petition (and contest it)
- Step three : Once the response has been recorded by the court, the Petitioner can submit their decree nisi application
- A judge reviews all the paperwork, and if satisfied, will issue the decree nisi pronouncement date.
- Step four : Once this date has elapsed, providing the couple have agreed their financial claims they can submit a consent order, however, this is optional.
- Step five : Six weeks one day after the decree nisi date, the Petitioner can apply for the decree absolute, but it’s recommended to wait until the consent order has been sealed prior to this.
What happens to an inheritance when you divorce, will depend on if you have chosen to submit a consent order or apply for a financial remedy order at step four of the divorce process. We will outline implications for both below.
The starting point of any financial agreement is that the couple have to provide full disclosure of all their assets. This means any inheritance received, or likely to be received in the foreseeable future, will need to be disclosed and discussed. If the person who has received the inheritance wants it excluded then this is referred to as ' ring-fencing '.
When a Judge reviews your consent order, they take into consideration multiple factors including children’s welfare, length of marriage and contributions made. You can have a look at some other factors a Judge may consider when reviewing your financial settlement via the amicable agreement checker.
Ring-fencing refers to asking the court to keep the inherited assets out of the ‘matrimonial pot’. There is no guarantee that the court will do this, as this is largely dependent on the needs of both of the couple and their children being met. If their needs can be met without taking into consideration the inheritance monies then the court could ring-fence and not include the inheritance assets. Another consideration is the time when the inheritance was received i.e. prior to the marriage or after separation.
Inheritance received prior to the marriage:
If you received an inheritance prior to your marriage, and you start divorce proceedings, this would normally still be included in your matrimonial assets, unless there’s a clear reason why this should be ring-fenced. For example, if you were married for a very short period of time and have no children and/ or if outlined in a prenuptial agreement. Again, it is dependent on the needs of the couple and their children, if any, being met.
Will a prenuptial agreement protect my inheritance?
In theory, agreements outlined in a prenuptial agreement such as ring-fencing any inheritance should serve as persuasive evidence to the court should a couple separate and submit a consent order or apply for a financial remedy order. A prenuptial agreement in itself is not legally binding, as this would have to go through the court and be made so through an order.
What happens if I don’t submit a consent order?
If you don’t submit a consent order or apply for a financial remedy order, you will still be financially tied together, regardless of whether your divorce is finalised. A consent order includes a clean-break clause that ends future claims. Therefore, without one, your ex can still claim from you in the future, until they remarry or die. If you receive any inheritance after you are divorced and you don’t have a consent order outlining your financial arrangements and containing a clean-break clause, or a prenuptial agreement, ring-fencing your inheritance, your ex could claim from you in the future.
Inheritance received during the marriage:
If you receive an inheritance during your marriage, this again is included in your ‘matrimonial pot’ and is therefore included in your financial settlement, unless there is a justifiable reason why this shouldn’t be included. We can help you with this, if you and your ex are confused or need any help with any element, you can book a coaching session with an amicable expert.
Inheritance received after divorce:
Your ex can still claim from you after your divorce if you haven’t got a financial order ending future claims. This is why having a consent order is so important for couples wishing to protect themselves in the future. In the same way that if you were to win the lottery and you didn’t have a financial order ending future claims, your ex would still be able to make a claim on this, they would also be able to claim future inheritance even if you inherited it after your divorce was finalised. You are able to have a consent order containing a clean-break clause, even if you haven’t currently got any financial arrangements to make (property, pension, savings etc.) so it’s often recommended if you may inherit in the future and want to protect this from your ex-spouse.
Children’s inheritance post-divorce:
You can outline arrangements for your children when you revise your will, based on your financial settlement. You should consider that your ex may wish to remarry and may go on to have additional children in the future.
What happens to inherited property in a divorce?
This will depend on multiple factors, such as when the inheritance was received, the needs of the couple and their children, however, will likely be included as part of your matrimonial pot and then agreed to be “ringfenced” as part of your divorce financial settlement.
Is inheritance part of the divorce settlement?
Usually, unless there are reasons why it should be excluded, or if you have a financial order ending future claims or ring-fencing the inheritance.
How to protect your children's inheritance from divorce UK?
In England and Wales, a financial order and updating your will should help protect your children’s future inheritance.