Protecting An Inheritance From Divorce: Avoiding Stupid Mistakes!

Protecting an inheritance from divorce proceedings is an important consideration for any separating parties who may have recently received an inheritance or anticipate receiving one in the future.

Inheritance Received vs Anticipated Inheritance

The first step in protecting an inheritance from divorce is distinguishing between an inheritance that has been received, and one that is anticipated to be received. Simply, an inheritance that has already been received by a party is likely to be more readily contemplated by the Court as a matrimonial asset. By contrast, just because a party believes that they may be entitled to an inheritance in the future does not necessarily mean that the anticipated inheritance will be characterised as forming part of the matrimonial asset pool.

The reasoning behind this distinction is generally due to the fact that until an inheritance is received, its distribution remains subject to the personal preference of the gifting party. That is, the gifting party may ultimately decide to distribute their estate in a manner that does not guarantee the receipt of any property or asset to the individual who was otherwise once anticipating a distribution.

Moreover, any entitlement anticipated to be received by a party may be subject to challenges made to probate. Meaning, even where a party may likely receive an inheritance, until probate is cleared, the Court has the capacity to character the interest as a financial resource (and not vulnerable for division) rather than a matrimonial asset.

Therefore, the first step in protecting an inheritance from divorce is to determine whether the inheritance itself is likely to be included in any divorce property settlement proceedings.

Does It Make Any Difference Where An Inheritance Is Received Solely by One Party?

In protecting an inheritance from divorce, a common question asked by parties is whether the inheritance may be protected if it is bequeathed to one party (rather than the party and their spouse), or where it is received into an account in the sole name of a party.

Simply, in protecting an inheritance from divorce, it generally does not make any difference whether the inheritance is gifted to one party and into an account solely owned by one party.

Pending the finalisation of property proceedings, any lump sum gift or payment received jointly or solely by the parties, will likely form part of the matrimonial pool of assets and subject to division between both of the parties. This includes any lump sum payment from inheritances, redundancies, compensation payments, and so on.

Although there will be rare circumstances where a lump sum payment received by a party prior to the finalisation of property proceedings may not be included in the matrimonial asset pool. However, these particular circumstances are outliers and you should always work off the assumption that your former partner will share an interest in any money received by you up until the date that property proceedings are finalised.

Protecting An Inheritance From Divorce

Having considered where a party is likely to be unsuccessful in protecting an inheritance from divorce, the question you are probably asking is how would a party be successful in protecting an inheritance from divorce.

The answer is not simple and there is no particular statute or legal precedent which ensures that an inheritance may be protected from a former spouse.

The best means to do so, would be to seek that you and your former partner enter into Consent Orders, which creates a clear distinction between the inheritance and the remainder of the joint matrimonial pool of assets. This will of course depend on the agreement of your former partner.

You are probably asking ‘why would any former partner, particularly my former partner, agree to forgo an inheritance‘.

Although you are probably correct, there are a number of invaluable negotiation strategies that may be employed when protecting an inheritance from divorce. When facing the prospects of expended exorbitant sums of money in court fees and legal fees just to consider whether they have an entitlement to an inheritance, your former partner’s enthusiasm or appetite for litigation is likely to wane. This will be the first step in protecting an inheritance from divorce, by opening the door to negotiations which ensure that your inheritance is protected.

Protecting an Inhertiance from Divorce Court Proceedings

If you are unsuccessful in seeking to negotiate a resolution which guarantees that your inheritance is protected, the next step is to seek that the interest is protected throughout the course of litigation.

Litigation is inherently uncertain. You can never anticipate any particular outcome and you should be wary of solicitors to suggest otherwise.

Rather, all you can do is seek to maximise the possibility that your desired outcome is achieved at a final hearing. In relation to protecting an inheritance from divorce, your intention should be to put the proper procedures and mechanisms in place prior to any inheritance being received.

Clear and unequivocal expressions of the intentions of a benefactor will likely be considered by the Court. Any Will which clearly records the benefactor’s intention that an inheritance be solely recieved by one particular party rather than as a joint assets between that party and their spouse may be given some consideration by the Court. Accordingly, where separation may occur in the future, it may be worth seeking that any relevant benefactor in your life seek to update their Will.

Similarly, upon receipt, any monies received and that is isolated into an account that is inaccessible to your former partner would increase the possibility that the Court agrees to have an inheritance excluded from the matrimonial pool of assets. In addition, contemporaneous correspondence between the parties which identifies the quarantined assets would demonstrate a tacit agreement for the inheritance to be excluded from the matrimonial pool of assets.

Protecting an Inheritance from Divorce: Concluding Remarks

When protecting an inheritance from divorce, there is no sure-fire means to guarantee success. The best way to ensure the protection of your assets is to finalise any property proceedings prior to the inheritance being received.

Where that is not possible, protecting an inheritance from divorce may involve entering into negotiations which propose a final resolution that effectively quarantines your entitlement. Being subject to the agreement of your former partner, this will generally involve give and take, as well as reinforcing the idea that the amount that your partner will likely expend on litigation to determine the inclusion of your inheritance will outweigh any financial benefit that they are likely to receive.

Finally, where all else fails, it is important to establish basic steps and processes prior to the receipt of an inheritance and which will likely assist you in convincing the Court that your inheritance should not be included in the matrimonial pool of assets.

Contact us today for a free consultation and further advice in protecting an inheritance from divorce proceedings.