Death and divorce – where does the money go?

Divorce|October 22nd 2008

Every so often, something dreadfully unexpected happens in a divorce case: one of the parties dies. The chances of this are slim but when it happens, everything is thrown into turmoil. What happens to the couple’s assets?

Regardless of any will that has – or hasn’t – been made, the court has power under Section 2 of the Inheritance (Provision for Family and Dependants) Act 1975 to adjust the estate of the deceased between claimants. Such a claim is subject to time limitation and must be made promptly.

An article by barrister Sidney Ross of 11 Stone Buildings in this month’s Family Law journal explores recent cases over the last 12 months, and examines how the courts approach such cases. He points out that on the death of an estranged spouse or former spouse, the court may well provide more generously for a claimant than was likely on divorce.

Two cases stand out in my mind, and the first of these proves Mr Ross’ point. A very grand couple was divorcing, and some of their marital assets were owned by a dynastic family trust hundreds of years old. A vast estate was wholly owned by the trust, and “loaned” by the trustees to the relevant beneficiaries. The couple enjoyed an enviable lifestyle during the marriage. Sadly the husband was diagnosed with cancer, but it was not believed to be terminal.

The couple agreed how the assets would be split. However, the husband died before the court had made an order that would have given the wife a clean break from her husband.

She was then able to make a claim under the Inheritance Act. All the other beneficiaries under the trusts were amply provided for – and after a long negotiation, with the consent of all concerned, my client obtained more than she had been about to receive in the divorce.

In the second case, the husband was my client. This couple had children, and had been married for a long time. The husband had fallen head-over-heels for another woman, and had left his wife. He felt bad about what he had done, but had made his choice. His financial settlement was generous: in return for no further maintenance liability to his wife, he paid over all his capital to her. This amounted to his interest in a modest house and some insurance policies which, in the event of his death, would provide for his family). He also agreed to pay generous maintenance to his children. He knew that he had not need to pay so much, but was committed to walking away from his marriage with the knowledge that his family was financially secure.

He bought a small house with his new partner. The purchase was funded by a capital payment from her, and a large mortgage with an insurance policy in place as security. Several years later he died in a road accident – and it emerged that he had not made a will. The insurance policy paid off the mortgage in full. As he had owned the property with his new partner as ‘beneficial joint tenants’, his share of the house passed to her automatically.

His former wife challenged this. She instructed solicitors to make a claim on behalf of the children under the Inheritance Act. When we wrote back refuting the claim, however, she never issued proceedings.

I suspect she was advised that she would fail. The court would have had a balancing exercise to make; given his new partner’s contribution to the property, and to the mortgage and insurance policies, they would have likely made an order that allowed her to stay in her home. The former wife had already received a generous settlement that provided for the family.

A third case, Staden v Jones (2008) EWCA Civ 936, was reported in this month’s Family Law. A husband agreed in writing that upon divorce, in consideration of his wife transferring to him her interest in the family home, he would undertake to pay his daughter 50 per cent of the net proceeds if the property was sold. If the property was not sold, he would “ensure this one half beneficial interest devolves to our daughter”.

Having thus acquired the wife’s share, he remarried. He continued to live in the property and – in breach of his agreement – transferred it to himself and his second wife, when the couple became beneficial joint tenants.

The man died, and the property automatically passed to the second wife. The daughter sued. The second wife claimed the agreement was unenforceable and in any event could only be brought by the wife, who was entitled to mere nominal damages. This argument was accepted at first instance; however, the Court of Appeal set aside the judgment and upheld the daughter’s claim. They found that there was a ‘constructive trust’ in her favour. It seems common sense to me – but this is Chancery law, which is a minefield.

My advice is as follows. Make a will that provides for everyone who is financially dependent on you. Last, but not least: honour your agreements.

Author: Marilyn Stowe

The founder of Stowe Family Law, Marilyn Stowe is one of Britain’s best known divorce lawyers. She retired from Stowe Family Law in 2017.

Comments(10)

  1. Jonathan James says:

    I am interested in the second of these examples. Sadly I dealt with a case a couple of years ago with almost exactly the same facts. The difference was that the former wife did in fact issue an application under the Inheritance Act and pursued it to trial. The only asset in the estate was the house which the former husband had owned solely and which he had left to his fiance. He died in his forties of a sudden illness, just weeks before the wedding.
    The trial was one of the most embarressing I have ever witnessed. The former wife spent the first morning giving evidence and at lunch time, had to withdraw her application because it was so unlikely to succeed. The twist in the tail was that although the fiancee was entitled to have her costs paid by the former wife, she actually agreed to pay the wife instead so that her fiance’s daughter would not suffer financially!
    Never underestimate just how undignified some people become when they see money.

  2. Luke says:

    Jonathan your comment is so right, you never really know how that “loved one” who you trust so much is going to react when money comes into the frame 5/15/25 years down the line if things have cooled – that is why it is sensible to get things sorted out legally and cut off such a horrible claim as the one you have described at the knees…

  3. Claire says:

    I was wondering if I could get some general advise to start me off. My Uncle recently died suddenly, he had been divorced for about a year – he had obtained his Decree Absolute – and my sister and I are his next of kin, due to the fact he had no children or new spouse. Unfortunately he left no will and going through his papers he and his ex had not finalised a financial agreement – due to her not willing to fill in any of the financial forms. Does she have any right to his estate? I am about to apply for Probate and understand I may need a solicitor, I just want to know where I stand going into this and if I’m going to have a fight on my hands. I’d rather give the estate to an animal charity than give it to her!

  4. Andrew says:

    Divorce ends his ex-wife’s automatic rights – but she may be able to claim under the Family Provision Act. She will have six months from the grant of probate to issue a claim. You need advice NOW.

  5. David Andrews says:

    My wife divorced me after a silly row and we were both too stubborn to say sorry. I was living and working away a lot when she decided on a divorce. This was done but at mediation she refused to let me have any of my personal property and would discuss any financial split. Over the next several months she developed Parkinsons and eventually died having ignored my solicitors letters during this time. No will has surfaced and there is a house involved (I was not on the mortgage). My solicitor seems to be dragging his feet on everything so how do I claim on her estate?

  6. Lee Cooper says:

    My mother divorced my father in 2005. in the divorce agreement my mother agreed to half my fathers pention when he reached 65.
    This was part of the divorce contract.
    Sadly my mother passed away in 2013, just before my father turned 65,
    He is now 66 does he still owe money under the contract to her next of kin? my mother has 2 children to her first marriage and 2 to my father. the divorce was finalised in 2005 with this as an agreement

  7. Karen Walker says:

    I am currently divorcing my husband of 30 sum years. When we seperated i signed over the house to him on the understanding he would will the house back to me on death, As far as i know he has made no provision for this. If he dies before the divorce is absolute , what am i entitled to ? We have 3 grown up kids.

  8. Jo says:

    Not wishing to sound morbid but…just reached a financial settlement with my ex husband (divorced for 8 years before this got sorted), what happens to the settlement if he passes away before I am obliged to pay it, does the money get passed to his daughters (not my children) or does it die with him?

  9. Andrew says:

    Jo: it depends whether the order says anything on the point, but if it does not then the payment would be to his executors or administrators who would pay it to the beneficiaries under his will if he made one and to this next of kin if he did not. If he does not make a will then (1) if he remarries his wife will take the money and (2) if he does not it will pass to his children, and if the only ones he has are the daughters you will mention they will share it equally. Of course if he makes a will he can do as he likes – your settlement probably includes a term excluding the Family Provision Act (that is standard in a settlement like this) so you would have no claim to anything.

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