Inheritance and divorce or dissolution – everything you need to know

Divorce or dissolution introduce significant complexities in managing and dividing assets, particularly when inheritance is involved. Inheritance in the context of divorce or dissolution requires careful consideration to ensure that all parties achieve a fair and equitable resolution.

This guide delves into what inheritance encompasses, the forms it can take, and how it interacts with the process of divorce or dissolution.

What is inheritance?

Inheritance is essentially the transfer of assets, wealth, or obligations from a deceased individual to their designated heirs or beneficiaries. This transfer is typically governed by the provisions of a will, or in the absence of a will, by the laws of intestacy. Inheritance is intended to pass on not just material wealth but can also include responsibilities such as the care of dependents or the management of family businesses.

What can be included in an inheritance?

Inheritance can be diverse and may include:

• Monetary assets: Sums of money left in bank accounts or as cash.
• Investment portfolios: Includes stocks, bonds, mutual funds, and other types of investments that were owned by the deceased.
• Real property: This covers residential properties, commercial real estate, and other land assets.
• Personal belongings and valuables: Items such as jewellery, art, antiques, and other collectibles that may have significant emotional or monetary value.
• Vehicles and other high-value items: Cars, motorcycles, boats, and other luxury items.

These assets each carry specific legal and emotional implications in the event of a divorce or dissolution, especially concerning their valuation and management during the marriage or civil partnership.

The scope of financial settlements

Financial settlements can encompass a range of financial elements, including:

• Property and real estate: Decisions on whether the matrimonial home could be sold, one party should buy the other out, or if other arrangements should be made.
• Savings and investments: How joint savings, stocks, bonds, and other investments are divided.
• Debts: How to split any outstanding liabilities such as loans and credit card debts.
• Pensions: Division of the pension pots accrued during the marriage, which may require the instruction of a pension expert.
• Spousal maintenance: Ongoing financial support from one spouse to another for a specified period of time.
• Child support: Separate from spousal maintenance, the consideration of whether additional financial support for the children, such as funding private school fees are required. Child maintenance is an additional factor which in the first instance is determined by the Child Maintenance Service.

How is inheritance and divorce/dissolution related?

The relationship between inheritance and divorce or dissolution is complex and often contentious. When a couple decides to divorce or dissolve a civil partnership, the division of inherited assets can become a significant point of negotiation or dispute. The key issues typically revolve around whether these assets were maintained as separate property or were commingled with marital assets, which can convert them into joint property subject to division.

Is a spouse or civil partner entitled to inheritance?

The entitlement of a spouse or civil partner to inheritance money during a divorce or dissolution depends heavily on several factors:

• Nature of inheritance: Was the inheritance designated solely to one spouse or civil partner or to the couple jointly?
• Management of inherited assets: How were these assets used during the marriage or civil partnership? Were they kept separate or merged with marital assets?
• Legal precedents and agreements: Pre-nuptial or post-nuptial agreements may set terms regarding the handling of inheritance in the event of divorce or dissolution.

These considerations are crucial for accurately assessing and negotiating the division of inherited wealth during divorce or dissolution proceedings, ensuring that all parties involved receive a fair and just settlement.

Is a spouse or civil partner entitled to inheritance received before or during divorce or dissolution?

The entitlement to inheritance money received either before or during the divorce or dissolution can vary significantly based on how the assets were handled during the marriage or civil partnership. Assets inherited before marriage or civil partnership are generally considered separate property and typically remain with the individual to whom they were bequeathed.

However, the scenario changes if the inherited assets were commingled with marital assets. For instance, if inheritance money was deposited into a joint bank account and used for common marital expenses, it might be deemed part of the marital assets and thus subject to division.

During the marriage or civil partnership, the same principles apply. Inheritance received during the marriage or civil partnership is initially viewed as separate. Yet, how these assets are used can influence whether they remain separate. If the inherited funds are used to purchase a family home or other shared assets, they may be considered marital property, making them potentially divisible in financial remedy proceedings arising from divorce or dissolution.

What happens to inheritance received after divorce or dissolution?

Inheritance received after a marriage or civil partnership has legally ended is typically straightforward—it remains the sole property of the recipient. Since the assets are acquired post-divorce or dissolution, they are not considered part of the marital assets and are thus protected from division. However, this clarity often hinges on the divorce or dissolution being fully finalised, including all financial settlements being legally concluded.

Is my spouse or civil partner entitled to half of the inheritance?

Whether a spouse or civil partner is entitled to half of the inheritance hinges on several factors, primarily revolving around the timing of the inheritance and the couple’s financial arrangement during the marriage or civil partnership. Generally, inheritance is not split equally unless it has been commingled with marital assets or used in such a way that it becomes jointly owned. The courts may also consider each spouse’s or civil partners financial needs, especially if children are involved, and the overall contributions each party has made to the marriage or civil partnership, both financial and non-financial.

The division can also be influenced by pre-nuptial or post-nuptial agreements, where provisions might have been made regarding the handling of inheritance in the event of divorce or dissolution. These agreements can specify that certain assets, like inheritances, are to remain the property of one spouse or civil partner, thus protecting them from being divided during the divorce or dissolution.

How to protect your inheritance from divorce or dissolution

Protecting your inheritance from the complexities of divorce or dissolution is crucial to maintaining your financial independence and respecting familial wishes. Here are some effective strategies to safeguard your inheritance:

1. Keep inheritances separate: Always keep any inheritance separate from matrimonial assets. Avoid using these assets for joint benefits, such as investing in joint property or even a property solely in your name that may become the matrimonial home.
2. Maintain detailed records: Keep meticulous records showing the source of your inheritance funds and ensure these are not commingled with joint assets. This documentation is invaluable, especially if the inheritance was received long before the potential divorce or dissolution.
3. Careful estate planning: Engage in detailed estate planning with professional advisors who understand your aim to protect your inheritance from potential divorce or dissolution risks. Ensure any estate or tax planning avoids transferring assets into joint names unless absolutely necessary.
4. Consult a family lawyer: Obtain legal advice specific to your circumstances. A family lawyer can assess how protected your inheritance might be in the event of a divorce or dissolution, particularly if it forms a substantial part of your assets. They can develop strategies tailored to safeguard your inheritance effectively.
5. Implement prenuptial or postnuptial agreements: Establishing a prenuptial or postnuptial agreement is one of the most robust methods to protect your inheritance. These agreements can clearly define what constitutes matrimonial and non-matrimonial assets and outline how assets should be handled or distributed in the event of a divorce or dissolution. Provided these agreements are properly executed and meet all legal conditions, they are generally upheld in court, securing your inheritance as agreed.

By adopting these strategies, you can significantly enhance the protection of your inheritance against the financial implications of a divorce or dissolution, ensuring your assets remain preserved according to your wishes and familial intentions.

Seeking professional legal advice is crucial to tailor these protections effectively to your situation and jurisdiction. Speak to Moore Barlow and we can help you by discussing your options.

Protecting children’s inheritance from divorce or dissolution

Protecting a child’s inheritance in the event of a divorce or dissolution is a priority for many parents, aiming to ensure that assets meant for children are preserved irrespective of marital breakdowns. There are several effective strategies to safeguard such assets:

Trusts

Establishing a trust is a robust way to protect a child’s inheritance. Assets placed in a trust are managed by trustees for the benefit of the children and are legally separate from the marital assets. This separation prevents these assets from being considered in divorce or dissolution settlements.

Prenuptial and postnuptial agreements

These agreements can specify that certain assets, such as those inherited by one spouse or civil partner or designated as a future inheritance for children, are excluded from any future divorce or dissolution settlements. This legal arrangement provides a clear directive that protects the child’s inheritance from being divided during divorce or dissolution proceedings.

Separate accounts

Keeping inherited assets in separate accounts in the child’s name also helps shield these funds from divorce or dissolution disputes. It’s crucial that these funds are not commingled with marital assets, as this can blur the lines of ownership and potentially expose the inheritance to division.

Legal advice

Consulting with a solicitor who specialises in family law can provide guidance on the best methods to protect a child’s inheritance, tailored to individual circumstances and in compliance with current laws.

What happens if my partner died while we were separated?

The death of a spouse or civil partner during a separation can complicate matters, especially if the divorce or dissolution has not been finalised. Legally, you are still considered married or civil partners until the divorce or dissolution is complete, which can have significant implications for the disposition of the estate.

Inheritance rights

As the legally married spouse or civil partner, you may be entitled to inherit, especially if no will exists. Under the rules of intestacy, the surviving spouse or civil partner often has priority in inheriting assets, which can include property and other significant holdings.

Estate administration

If your spouse or civil partner had a will, the assets would be distributed according to their wishes outlined in the document. However, if no will exists, the state’s intestacy laws come into play, potentially granting you a significant portion of the estate, depending on other surviving relatives.

Handling situations where there is no Will

The absence of a will (intestate situation) after the death of a spouse or civil partner during separation further complicates the distribution of the estate. Here’s what generally happens:

Intestacy rules

Without a will, the estate of the deceased is distributed according to strict intestacy rules. These rules prioritise the surviving spouse or civil partner and children but can vary significantly between different jurisdictions.

Claiming the estate

As the surviving spouse or civil partner, you may be entitled to claim the entire estate or a substantial part of it if there are no children. If children are involved, the estate may be split between the surviving spouse or civil partner and the children.

Legal complications

The lack of a financial order or final order of divorce or dissolution at the time of death can lead to complex legal challenges. It may be necessary to seek legal advice to navigate claims and ensure that the estate is distributed fairly according to the law.

Navigating the interplay between inheritance and divorce or dissolution or separation requires careful legal consideration, especially to protect the interests of children and ensure fair treatment under the law. Legal counsel is essential in these situations to manage the complexities effectively and safeguard the rights and assets of those involved.

Why choose our family law solicitors?

Here at Moore Barlow our family law solicitors have extensive experience and knowledge in handling a wide range of family and divorce or dissolution matters. We understand that these issues can be emotional and complex, and we strive to provide compassionate and practical advice to our clients.

Our team is dedicated to achieving the best possible outcome for you and your family, and we pride ourselves on our client-focused approach. When you choose our family law solicitors, you can trust that you are in capable hands.

Contact us today