Inheritances and divorce: Can my spouse claim a share of my inheritance?
Since the landmark case of White v White [2000] UKHL 54, which concerned an inherited farm there have been many cases considering how the family courts should treat inherited assets on divorce.
Meeting needs first
It is perhaps surprising that Section 25 Matrimonial Causes Act 1973 (MCA), which contains the statutory framework for applications for a financial remedy (formerly “ancillary relief”) does not specifically refer to inherited assets. Future inheritances are considered by the court under s25 (2) (a) MCA as one of the financial resources to which one of the parties has or is likely to have in the foreseeable future. Inheritances already received are looked at under the statutory factor of “contributions”.
In White, Lord Nicholls drew a distinction between property acquired during or prior to the marriage by one spouse from an external source (i.e. gift or inheritance), and “matrimonial property” acquired during the marriage. He said that inherited property must always be taken into account as “one of the circumstances of the case”, but “the other spouse has a weaker claim to such property than he or she may have regarding matrimonial property”. However, where both parties’ needs cannot be met without recourse to the inherited assets, the fact that they are inherited will carry little weight, if any. Needs, and the welfare of any children of the family, are the court’s first priority.
I acted for the wife some years ago, where the husband had a reasonable income but no capital apart from a substantial sum received by way of inheritance shortly after the breakdown of the marriage. The husband had to pay around 95% percent of the inheritance to the wife as it was needed to rehouse the wife and the young, below school age children.
Recent cases
In Robson v Robson [2010] CA 1171, the Court of Appeal gave detailed guidance on the court’s approach to inheritance. One senior judge, Ward LJ, advised judges to focus on the precise wording of s25 MCA 1973 and avoid applying judicial gloss such as “reasonable requirements” or “needs generously interpreted”. Since inherited property is part of the property and financial resources which a party has, it must be taken into consideration, but should be treated differently from matrimonial property. Interestingly, the judge stated that the nature of the inherited asset may be relevant. For example, a valuable heirloom intended to be passed down the generations may be treated differently to an inherited portfolio of investments.
In K v L [2010] EWHC 1234, the assets totalled £59 million all of which had been inherited by the wife prior to the marriage. However the assets had increased in value a great deal during the 21 year marriage. The inheritance had been used to support the family, there were 3 children. The husband sought £18 million. However he was awarded only £5 million. The inherited nature of the assets was said to be of “central importance”. The court was heavily influenced by the fact that the wife had kept the assets, mainly shares, in her sole name and there had been no mingling or discussion about putting the assets into joint names. The award was in excess of the husband’s needs. The award amounted to only around 8.5% of the family assets. Some consider this case to be discriminatory to men and wonder whether the result would have been the same if the Applicant had been a wife. See the article written by myself and Lehna Hewitt “It could be you: Do the Family Courts Discriminate against husbands? (published June 2012 Family Law).
After that article was published the case of Y v Y [2012] EWHC 2063 (Fam), seemed to prove the writers’ view point. Here the assets were a landed estate, farm land, a public house and commercial premises. Here the wife received around 32.5% of the family assets around £8.7m, even though the property was largely inherited by the husband and had been in his family for generations.
In Davies v Davies [2012] EWCA Civ 1641 the husband was the sole owner of a successful hotel business founded by his grandfather. At the first hearing the judge divided the assets in 3 parts and ring fenced one third, due to the source of the asset. The remaining 2/3 were divided equally. The husband appealed. Whilst the Court of Appeal agreed with the husband that the judge was wrong to say that the value of the business was nil at the start of the relationship nonetheless the 1/3:2/3 split produced in rough and ready terms a fair outcome.
So what can you do to attempt to secure a degree of certainty upon divorce where you have pre-acquired or inherited assets? It helps if the assets are retained in your sole name and ensure that they are not “mingled” with the matrimonial assets. That way, it is easier to argue that the assets should not form part of the matrimonial pot for division on divorce. However, needs will always come first and the fact that assets are inherited may be of little relevance where needs cannot be met without using inherited assets. Therefore, if you are concerned about protecting inherited assets on divorce, you should consider entering into a pre-nuptial or post-nuptial agreement.