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Many clients contemplating separation, or who are newly separated, ask me whether they will have to share an inheritance if they get divorced. Similarly, I am often asked by parents intending to leave or gift money to their adult children whether the gift will be safe if their child goes on to divorce their spouse.
The answer is that it depends.
Inherited money after divorce
Money or other assets inherited or gifted to you before or during your marriage are not automatically excluded from the matrimonial financial ‘pot’. In other words, they will not automatically be ring-fenced and may have to be shared between you on divorce.
Whether or not you will have to share your inheritance on divorce depends on the specific circumstances of your case.
It’s more likely that you will be able to retain an inheritance intact if:
- it has been kept completely separate from the matrimonial finances; and
- the needs of the family can be met by dividing the other assets alone.
You are much more likely to have to share your inheritance after separation if:
- it has been mingled with matrimonial assets – eg. used to fund the family, purchase the family home or pay off the mortgage; and/or
- the family’s needs cannot be met from the matrimonial assets alone.
With regard to a future inheritance after separation, this will not usually be taken into consideration when the financial aspects of divorce are dealt with. This is because it can be difficult both to gauge life expectancy and to estimate the size of a potential benefit as testators (people making a Will) cannot be compelled to disclose their intentions, which may change over time anyway.
Exceptionally, however, where there is an expectation of a significant inheritance after separation, the court may adjourn part of a financial application on divorce until the inheritance is received.
If you wish to protect an inheritance, or if the person making the inheritance is keen for you to protect it, you should consider entering into a pre-nuptial or post-nuptial agreement with your spouse. While this does not guarantee that your inheritance will remain intact if you divorce, it increases the chances.
Separated but not divorced inheritance
The court cannot make financial orders about dividing a couple’s money and other assets until the later stages of the divorce proceedings. But many couples do not divorce immediately after they separate. A common reason for this is the still current requirement to attribute blame. For this reason, it is not uncommon for couples to wait for two years in order to divorce on the basis of the period of separation.
While you are still legally married, if you die without making a Will, the intestacy rules recognize your spouse as your primary beneficiary. That is why it is crucial that you make a Will, or update an existing one, when you separate, in order to reflect any change in your wishes. Your new Will should reflect what you wish to happen to your estate after your divorce. Once your divorce is finalised, if it turns out that the terms of the divorce mean your wishes cannot be carried out, you can update your Will again to reflect this.