Inherited Assets and Assets owned prior to Marriage

31 December, 2018

 

The status of inherited and pre-marital assets is very often a topical issue when a couple divorce and try to resolve how the assets of the marriage are to be divided.

The underlying principle is that assets that fall in the category of “matrimonial” assets should, as a starting point, be divided equally between the husband and wife. This does not mean that there will always be a 50:50 division in practice, as the court will then consider the other relevant factors of the case to decide whether this principle should be departed from and, if so, to what extent.

One of the first tasks of the court will be to identify all of the assets owned by the spouses and then establish whether those assets are matrimonial assets or non matrimonial assets.

Where a spouse owns inherited assets, or assets acquired before the marriage, then these assets will fall into the category of non matrimonial assets. Where there are assets of this nature then there may be an argument that they should be ring-fenced and should not be available for division between the spouses.

The judge will consider the background of the non matrimonial assets and how they have been treated, or dealt with, by the parties during the marriage. If an inherited/pre-marital asset has been used or relied upon during the marriage or has been allowed to “mingle” with the matrimonial assets then it is possible that it will be treated as having assumed the characteristics of a matrimonial asset and, therefore, be available for division. On the other hand, if these assets have been kept intact and separate from the matrimonial assets then they are more likely to retain their status, and be ring-fenced. For example, the use of an inherited asset as the family home or the use of inherited cash funds to provide a particular lifestyle is likely to alter the status of these assets.

Having completed this process, the judge will then assess the “needs” of the parties i.e. how much they need to have to enable them to rehouse and provide a home for the children.

The next question is whether the matrimonial assets can be divided in such a way that the needs of both parties can be met. If so, then this category of assets may be divided between the parties to enable them to meet their needs, with the inherited/pre-marital assets remaining untouched.

If, however, the matrimonial assets are insufficient to enable the parties to rehouse the position changes. In this instance, the court may well use the non matrimonial assets to enable the economically weaker party to rehouse, in order to achieve fairness. In other words, the needs of the parties will “trump” the status of a non matrimonial asset.

The assessment of the needs of the parties will very much depend on the relevant circumstances of the couple. For instance, the needs of a young wife leaving a short, childless marriage may be very different from the needs of an older wife, with adult children, leaving a long marriage with little or no earning capacity.

Each divorce case will be dealt with by reference to its own particular facts. The court has a wide degree of discretion as to how to achieve fairness and whilst it is possible to obtain general principles, as above, from case law there are no hard and fast rules for how the assets of a marriage are to be divided.

If a spouse has inherited or pre-marital assets then they may be able to increase the chance of these assets being ring-fenced by entering into a prenuptial or postnuptial agreement. Such an agreement, in combination with keeping the assets separate from the matrimonial assets, may help but, unfortunately, there can be no guarantees.