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Inheritance can often become a ‘sticking point’ during separation or divorce, with one party concerned about the other making claims on their received or prospective inheritances.
Some may argue that the law should protect inheritances for the individual, but the issue is more complex. Individuals can take steps to minimise the risk of including inherited assets in divorce settlements. We will discuss some of these within this article.
The difference between Matrimonial and Non-Matrimonial Property
The law differentiates matrimonial assets, which both parties acquire through their joint efforts during the marriage, from non-matrimonial assets, such as inheritances or gifts an individual receives.
The definitions of these assets are as follows:
Matrimonial Property
The “sharing principle” applies to matrimonial assets, meaning both parties typically divide them equally during a divorce, though exceptions do exist.
Non-Matrimonial Property
Courts generally consider inheritances as non-matrimonial property and do not automatically subject them to sharing unless specific circumstances apply. They often allow the original recipient to keep these assets, as long as the other party’s financial needs can be met without accessing them.
Safeguarding your inheritance
Here are the best practices* for safeguarding your inheritance:
Keep your inheritances separate
- Avoid using inherited funds for joint purposes or investing them in shared property.
- Keep inheritances in accounts held solely in your name and separate from joint finances.
Maintain accurate records
- Document the source of your inheritance and keep it separate from matrimonial assets. This step is especially important for inheritances received long before a divorce.
Strategic estate planning
- Work with professional advisors to structure your estate in a way that protects your inheritance from divorce. Ensure advisors are aware of your intentions to shield these assets.
Seek legal advice
- Consult a family lawyer to understand how your specific circumstances may impact the treatment of your inheritance. You may need individual strategies to protect it.
Pre-Nuptial or Post-Nuptial Agreements
- An agreement is the most effective way to protect your inheritance.
- These agreements clearly define which assets are matrimonial and which are non-matrimonial, outlining how they will be treated during a divorce.
Additionally, when one partner inherits assets from a family member or loved one, they may also want to ensure that this inheritance is passed down to their children.
Protect your children’s inheritance during divorce
Taking proactive steps early can significantly reduce the risk of your inherited assets becoming part of marital property during a divorce. So, what can you do to protect your children’s inheritance from risk during divorce? Let’s take a look…
Keep inherited property separate from marital assets
To safeguard inherited assets, avoid mixing them with jointly owned marital property. Achieve this by:
- Keeping inherited money in a separate account, not shared with your spouse.
- Titling any inherited assets, such as property or investments, in your name only.
By maintaining a clear distinction between marital and inherited assets, you can help ensure that only your children will benefit from the inheritance in the future.
Establish a Trust for your children
- Placing inherited assets in a trust is a common and effective way to protect children’s inheritance. By naming your children as beneficiaries, you can preserve the inheritance. If you keep it separate from marital assets and secure it properly in a trust, your spouse is unlikely to have a legal claim on it during a divorce.
Whether through careful asset management, legal agreements, or establishing a trust, these measures help ensure that your children receive the inheritance as originally intended.
Hopefully, after reading this short summary, you feel more confident about taking action to safeguard your inheritance in the instance of divorce.
If you would like to find out more about this topic and how we can support you in your legal services, please contact the team
(*Please note – we recommend you seek guidance for your own personal circumstances as this information does not constitute financial or legal advice)