Often, one of the most contentious issues that must be resolved when a couple divorces is how their finances should be divided. Parties who have inherited money or assets often feel that their loved one’s wishes should be respected, and the inheritance should be kept for their sole benefit. However, whether or not an inheritance will be ring-fenced ie kept out of the marital ‘pot’ depends largely on how the divorcing couple treated the inheritance and, therefore, whether it should be classed as a matrimonial or a non-matrimonial asset.
Matrimonial and non-matrimonial assets
Assets are divided into two types: matrimonial and non-matrimonial. Generally speaking, matrimonial assets are those held in joint names or acquired or cultivated by the couple during their marriage. However, the Court is more frequently takes into account the assets from the date of cohabitation. The marital home is always a matrimonial asset. Non-matrimonial assets are those acquired by one partner in their own right, outside of the marriage.
Matrimonial assets always form the bulk of the pot to be divided between the divorcing couple when reaching a financial settlement. Non-matrimonial assets are generally excluded from the pot. However, non-matrimonial assets can morph into matrimonial assets regardless of their origin, for example, if they become mingled with matrimonial assets. Furthermore, the Court may take non-matrimonial assets into account to reach a fair outcome if the matrimonial assets are insufficient to provide for both parties’ reasonable financial and housing needs.
How is inheritance treated in divorce?
The key question, therefore, is whether the inheritance is classed as a matrimonial or non-matrimonial asset. Since inheritance is left to one of the partners individually, many consider that it should automatically be classed as non-matrimonial in nature. Indeed, in some cases, it will be, particularly if it is due to be received after the divorce is finalised or was kept in a separate bank account throughout the marriage. However, assets that are initially non-matrimonial can easily morph into matrimonial assets. So, for example, if the inheritance was held in a joint account or used to benefit the whole family, it may have transitioned from being a non-matrimonial asset into a matrimonial one.
Essentially, therefore, there is no hard and fast rule governing how inheritance will be treated in divorce. Whilst the Court will not automatically include one partner’s inheritance in the financial settlement, it will nevertheless carefully consider how the inheritance was treated during the marriage. If the couple used the inheritance for their joint benefit, the Court may decide it is, in fact, a matrimonial asset and should be shared between them. Even if the Court concludes that the inheritance is a non-matrimonial asset, it may still include it in the pot if the matrimonial assets do not adequately cater for each party’s needs.
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