What happens to an inheritance in the event of divorce?

Divorce|May 18th 2011

When a spouse’s wealth has been inherited rather than earned, it cannot be regarded in any sense as truly “matrimonial”. So if the couple divorces, to what extent should one party share in the assets of the other?

This is an area of the law frequently highlighted by advocates of legislation for prenuptial agreements. They cite the uncertainty of “judicial discretion”. They argue that it shouldn’t be up to the judiciary to decide, but that it should be for Parliament to legislate in statute form.

Critics of this inflexible stance, myself included, would argue that if prenuptial agreements are upheld, reasonable needs should be met. Nobody should be required to leave a marriage destitute. I would argue that ideally, the criteria from section 25 of the Matrimonial Causes Act 1973 should still be taken into account and considered by the court.

If this didn’t happen, I predict that we would see cases challenging the validity of prenups. Although the nature of the risk would alter, there would still be a likelihood of litigation from litigants who were desperate to be released from the agreements. What then? Prenuptial legislation would have become law, but there would be a need to avoid satellite litigation. Then there would be arguments about how prenups could circumvent such litigation, and how reasonable needs should (or shouldn’t) be taken into account. Round and round we would go…

In his recent speech to the charity Care, Mr Justice Coleridge called for a Royal Commission, the first since 1950, to consider changes to the law in relation to divorce, prenuptial agreements, cohabitation and ancillary relief.

He said: “The world we inhabit today is not the same world as we inhabited in 1950. Socially, society is unrecognisable. The norms of behaviour, the stigmas and the taboos have all changed or evaporated…When the last major reform was introduced there was no such thing as cohabitation outside marriage.” The current law is “a dead parrot” – it is “no longer fit for purpose”.”

Then again, inadequate legislation doesn’t seem to have put off Sir Paul McCartney or Prince William, both of whom apparently have no need of prenups, despite having a great deal that could be lost in the event of divorce.

As a practising family lawyer, I am satisfied with what we have. I am a great believer in our current requirements for fairness and discretion. Far from being out of touch, our judiciary has a strong grasp of the situation.

Consider the elegant judgment, reported in The Times on Saturday, of the newly-appointed Supreme Court Judge, Lord Justice Wilson. This was possibly his last Court of Appeal judgment; for this blogger, it was a pleasure to read. The case, which was also heard by Lord Justice Laws and Lord Justice Jacob, concerned a divorce and a wife’s inherited fortune of £57 million. Her husband argued that he should be given £18 million, but the judges dismissed his appeal.

Straightforward, comprehensible and mercifully brief (“in the light of the general need for the delivery of much shorter judgments upon applications for ancillary relief”), Lord Justice Wilson gave a reliable explanation of how applicants can expect to share in inherited wealth. He did so sensibly and without drama. The judgement gave a fillip to all those of us who believe that attempts to apply  inflexible statute law cannot work within our English system, which has fairness and judicial discretion at its heart.

In this case the husband was awarded 9 per cent of the total assets, a sum of £5 million. This was because all the assets had been inherited by the wife from her grandfather, and because during the marriage, the family had lived modestly on income derived from her inherited assets. It was decided that the sum of £5 million, which had already been openly offered by the wife, more than met his reasonable needs. The husband was also permitted to “share” in the assets of the wife, to the tune of an additional £1- 1.5 million.

Lord Justice Wilson did a swift, cogent, demolition job of the ingenious arguments put by the husband’s formidable counsel to share in a greater proportion of the wife’s wealth:

  • He found it was not a discrimination to make such an award out of inherited, non-matrimonial monies.
  • He found the importance of the source of the assets may diminish over time, in given circumstances, but that in this case, that had not occurred.
  • He found that the argument as to “special contribution” did not apply to non-earned assets, and therefore did not fall to be shared in the same way.

In answer to the argument that the amount was “appealably [sic] disproportionate”, he pointed to the inability of counsel to show the court any reported decision at all, in which the applicant had received anything other than reasonable needs out of non-matrimonial assets, in accordance with the sharing principle set out in White v White.

And that was it. Clear. Concise. From now it will help all of us who advise on inheritance cases.

For those terrified of losing inherited assets to a “gold digger”, I suggest reading this case for comfort. Once needs have been met, even generously met, non-matrimonial assets can remain intact.

I think that sits very well with our system of justice, and I look forward to future judgments from the new Supreme Court judge. I think he is going to make a much-needed, real and reliable difference to the practice of English family law.

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(16)

  1. JamesB says:

    I think the parrot is still breathing. It’s just a little tired at the moment. What do you expect it to do, your shopping? Clean the loo perhaps?

  2. JamesB says:

    Perhaps as any good lawyer, you seem to be as comfortable arguing for as against pre-nuptial agreements on your site Marilyn. So much so indeed, that I do not know upon which side of the debate you actually are.

    I have just read another blog by yourself arguing for pre nups, now here you appear to be arguing against. Which is it please?

  3. Marilyn Stowe says:

    Pre nups.
    1.Would I sign one as someone getting married for the first time age 26? No. Absolutely not. But then I might.
    2. Would I sign one entering a second marriage age 46?
    Yes to protect my assets for my first family or whoever else I might wish to benefit from my estate and to protect myself if the marriage went wrong in old age.
    3. Would I want a child of mine to sign one? Perhaps if it involved a gift to him or her I wish to secure for my child and my grandchildren but not for any in law. But:-
    Not if I truly want their marriage to work.
    4. Do I advise clients in certain circumstances to enter into them?
    Yes and No.
    Go figure!

  4. JamesB says:

    From that, looks to me like you are against them.

  5. Lukey says:

    JamesB,
    whilst I agree with your point that Marilyn comes over as ambiguous on this I think we have to cut her some slack here. She is a lawyer, so she probably has had to argue on both sides of the fence on this subject in her time, depending on who she is representing.

    My impression from her responses is that emotionally she doesn’t like them, whereas intellectually she knows they make sense. I have met a couple of smart women who respond in this way when the subject of prenups has cropped up.

  6. Marilyn Stowe says:

    In reply to both of you, I do have a ‘non legal’ take on pre nups which certainly does influence my thinking.
    Have you read Sara’s story on this blog? She hasnt signed a conventional prenup because she isnt married, but she is tied into an agreement she made when she started living with her partner, which he wont vary.
    She believes her contribution to the relationship over time now significantly outweighs her entitlement under the agreement and because he wont agree to vary it, the relationship is collapsing.
    I think this also applied to pre nups and therefore they are potentially hugely emotionally damaging to the weaker party and threaten the stability of a relationship from the outset.
    Best wishes,
    Marilyn

  7. Lukey says:

    Have you read Sara’s story on this blog?
    ==================================

    Yes, I can’t find it now but I did read it. Basically I believe her lover was up front with her about his position but she chose to shut her eyes, stick her fingers in her ears and not deal with the situation.
    It is sad and I am very sorry for her predicament, the guy was clearly not indicating that he was ever going to give her what she wanted and she should have dumped him like s**t off a shovel, however, I don’t see that anything can or should be done by the court system. Trying to create legislation to cater for people behaving idiotically just creates bad law.

    As for prenups, well they are PREnuptial agreements, if the ‘weaker’ party is unhappy or feels ’emotionally damaged’ by the proposed arrangement then they should either get agreement to change the prenup or don’t proceed with the nuptials. I cannot accept the patronising view that the ‘weaker’ party is too stupid or emotionally fragile to be capable of making such a decision.

  8. JamesB says:

    Have to disagree with you on that one Lukey. Don’t want a society where only the rich marry the rich and the rich marry the poor and the rich stay rich and the poor stay poor. Don’t want gated communities here as in America. We are not America or Australia. I like it here and can’t let you do that (been watching too many macho films with partners teenage boys recently).

  9. JamesB says:

    should have read and the poor marry the poor.

  10. Lukey says:

    “Don’t want a society where only the rich marry the rich and the rich marry the poor and the rich stay rich and the poor stay poor.”
    ======================================

    I have NO IDEA how you draw that conclusion from my statement. All I said was that PREnups allow both parties to know what they are getting into.

    Gated communities ? What relevance does this have ?

  11. JamesB says:

    Yes, there are some steps in between and explaining my view required.

    When entering into a pre nup the only way to have a fair one is if both sides have equal bargaining power. Otherwise the poorer party is ripped off as per the case we (and Marilyn) are using by way of an example.

    Thus, there is nothing in it for the poorer party but to walk away sooner or later (or be present in body but not in mind). Thus the rich go with the rich and the poor with the poor and social mobility grinds to a halt – like in the USA.

    The gated community is the rich putting walls around their wealth to keep the poor off it. It’s not how I want to live and not what I thought was better than communism. Treating poor people as parasites is evil and thus, on balance I don’t think I would sign a pre nup for that reason and agree with Marilyn on it. On a point of principle.

    Looks like marriages are over. My g/fs Dad (old Etonian, Oxbridge educated) asked if I would sign a pre-nup (to protect both families wealth) and marry his daughter. I said no. He said, it is difficult these days, and difficult when people come together later in life. Anyway, life is for living, not for lawyers, a saying I just invented. A more comprehensive answer I hope, from a comprehensive school educated boy. Regards, James.

  12. JamesB says:

    Then again, you don’t have to sign it, or could ask for more before you sign it (any pre nup), and anything is better than going to court (from experience). So, I think I have changed my mind on this. Yes, perhaps they are a good idea afterall. It is a difficult one though. So can see why Marilyn foinds it hard to decide. I do also. Think on balance a good thing and better to sort your own affairs out than a Judge or Government do it.

  13. JamesB says:

    Finds, not foinds.

  14. Tulsa Divorce Attorneys says:

    It should not be up to the judiciary. Inheritance is the separate property of the inheriting spouse….

  15. Lois Sycamore says:

    My parents worked so hard and I inherited 1/2 their estate 220k Why should this be taken into account so my husband benefits should we divorce. He is unemployed & totally living off me, deliberately not claiming his own mother’said estate estimated value 150k. He is doing this so he can get my money leaving his out of the equation. Court would not even look at this abusive behaviour when evaluating a settlement & frankly the law stinks! Just when I can afford to leave him I actually can’t & he can continue to abuse & silently blackmail me. Disgusting thanks to family law!

  16. Mark says:

    Hi

    I have inherieted my parents home that is mortgaged for next 20 years I live here with my girlfriend , I have asked her to marry me and she has her kids age 18 and 13 living with me as well .

    If I marry her can she claim part of the house if we do ever divorce in future .
    I have two children age 28 and 25 with my first wife and my parents wants my children to inherit there home when I die when ever that happens
    thanks

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