At the heart of any divorce or civil partnership dissolution is generally the process of dividing a couple’s money and property with the starting point being equality. But how are inherited assets accounted for in a divorce?
During that process, family lawyers are often asked whether one party can make a claim in respect of the other’s inheritance and the short answer to this question is maybe.
When deciding which assets are to be divided, the court distinguishes between those which are classed as Matrimonial and Non-Matrimonial assets.
“Matrimonial assets” are those which are jointly owned, acquired by either party during the marriage or co-habitation or otherwise those used and treated as a joint asset.
“Non-matrimonial assets” are those owned by either spouse before marriage or brought into the marriage from an external source such as an inheritance
Where a Court is satisfied that an asset can be classified as non-matrimonial, case law has established that a party should be allowed to keep that asset if the other party’s financial needs can be met from the matrimonial assets.
If the matrimonial assets aren’t enough to meet needs, however, the Court can consider redistributing the non-matrimonial assets. Equally, an inheritance can be seen as a resource for the party who received it and, while they may be able to keep their inherited assets, the other party may then receive more of the matrimonial assets to meet their needs.
To be classed as non-matrimonial property, assets must remain distinct and separate as a Court will look at how a couple has managed their financial affairs, how long it has been since the inheritance was received and what has been done with it since it was received.
Non-matrimonial property can therefore become “mingled” with matrimonial property over time making it more likely to be shared. This could be where money has been utilised to buy or improve the family home for example, irrespective of whose name the property is registered in.
Importantly though, even where a need is established, non-matrimonial assets will not be subject to the sharing principle and can only be used in so far as is necessary to meet need. That said, need is an elastic concept and in the context of “big money” cases, we see needs based awards which perhaps don’t mirror the average person’s idea of reasonable needs. Although not determinative, when making an assessment, the Court will generally look at the standard of living enjoyed during the marriage.
Recent case law – Inherited Assets
The questions of whether inherited assets had been mingled and the wife’s reasonable income needs were the central issues in one of the first reported cases of this year with the rather memorable acronym ST v AR [2025] EWFC 4.
This was a “big money” case with the total assets being valued in the region of £140million but the decision still provides some guidance as to the Court’s approach when balancing the non-matrimonial status of assets with meeting the needs of the financially weaker party.
In this case, the couple had been together almost twenty years in total although there had been a short period of separation in the middle to confuse matters.
The husband was aged 70 and a sculptor by trade. He had received a substantial inheritance from his grandparents held mainly in private equity-managed properties.
The wife, aged 51, had worked previously but not for almost 20 years by the time of separation and had largely relied upon the husband’s resources during their relationship.
There was one child who was aged nine, however, her own financial future had already been protected through substantial trust funds.
So, who said what and what was the outcome?
The husband argued that his inherited wealth had only been passively managed and therefore not mingled so should remain non-matrimonial.
The wife on the other hand argued that the husband was more than a passive bystander and had in fact taken an active role in increasing the value of his inherited assets such that she valued the matrimonial element of the pot at £51 million of which she would then be entitled to half.
The couple were also some distance apart as to their assessment of the wife’s income needs.
Although making a capital award higher than the husband had offered, the court accepted his argument, finding no evidence the assets had been mingled to such an extent that they were “matrimonialised”.
The court also assessed the wife’s reasonable needs more conservatively than the wife when considering the capitalised maintenance sum she was to receive and again came in much closer to the offer the husband’s had made.
The decision was a fact specific one which took into account the wife’s financial future and the family’s standard of living during the marriage whilst ensuring not to substantially eat into non-matrimonial funds.
What can we take away from this case?
Despite the wealth in this case, which may not be available to many, the wife’s claim was still assessed on the basis of need rather than sharing, and the husband’s assets deemed largely non-matrimonial. Ultimately, the court awarded the wife just shy of £14 million, being 65% of the liquid assets but only just over 9% of the total assets.
The husband’s passive management of his investments solidified the non-matrimonial status of his inheritance. As such, it’s clear the court will carefully consider the origin of an asset, how it has been used and whether it has been blended or “mingled” with the matrimonial pot. In this particular case, there were also issues of liquidity and taxation that impacted upon the judgment.
Can I protect my inherited assets in a divorce ?
If you have inherited a sum of money either before or during the marriage, it may be advisable to keep those assets separate and not use them for joint benefit nor invest into joint property (or equally a property in your sole name if this will be the family home).
This can be difficult to sustain in practice, even where careful records have been kept. In cases of more modest means, it is not uncommon for assets from whatever source to be used for family purposes making it difficult to establish a clear line between non-matrimonial assets and those built up within the marriage.
The best way to protect non-matrimonial assets is by entering into a pre or post nuptial setting out which assets are matrimonial or non-matrimonial assets if your relationship comes to an end.
Although not strictly legally binding in England and Wales, nuptial agreements will be considered provided they have been properly executed, freely entered into and not signed in clearly unfair circumstances (such as where there has been undue pressure or a lack of independent legal advice) and parties should expect to be held to the terms of the agreement.
It’s important to take legal advice as to your individual circumstances. A family lawyer can advise on the likely take a Court may take on your inheritance. For example, if the inheritance forms a substantial part of the assets in a particular case, it may be more difficult to protect an inheritance in full, and a careful plan may need to be made.
If you would like to give us a call, we provide an initial complimentary 30-minute consultation with the option to provide advice over the phone or in person. Call our Chester or Liverpool office 01244 354800 / 0151 3210000
