The issue of inherited wealth can cause problems when a couple divorces with
disagreements about how, and indeed if, the inheritance will be divided. Family
Law Partner Liz Allen has helped thousands of couples grapple with these
issues. First of all Liz how is inherited wealth dealt with in a divorce, is it
treated the same way as other assets being divided by the couple? The simple
answer is no it can be treated very differently but the essential starting
point for the courts is 50/50 and then they look at where the wealth came from. So
if a lot of wealth was inherited then it might be retained by the person who
inherited it. So does it matter if the wealth was inherited recently? It can
certainly help if the person wants to retain the wealth because if they
inherited their wealth say for example, after the separation but before the
divorce, it's much more likely that it would be retained than if it was
inherited much earlier during the marriage when it's perhaps more likely
to be shared. And does a couple's standard of living during their marriage impact
during the divorce? Yes that can make quite a big difference actually because
we look at the standard of living in the needs of the couple. So if for example,
the couple have lived very modestly that will have relevance. There was a very
famous case reported some time ago where the wife had inherited a lot
of money she was worth millions of pounds but they lived like church mice,
they really had no great standard of living at all, they had battered cars, old
houses and so when it came to divorce the husband got a very small share of
the wife's inheritance because he couldn't prove that he needed it he only
needed a modest standard of living. What other factors would lead the court to
exclude inherited wealth from the pot of assets being divided on divorce? The
way in which the wealth has been treated is quite a big factor so say for example,
the wealth has been what we would call mingled into the assets then it's less
likely to be retained. For example, if someone has a large
inheritance and they pay off their mortgage on the family home then they
would be very lucky indeed to get that money back again it's much more likely
to be shared. Whereas if the wealth has been kept separate for example, a large
portfolio inherited of shares that's never been mingled into the matrimonial
assets that might be retained, or a valuable painting that's perhaps been in
a gallery that would be retained. So it is important as to the way the wealth
been treated yes. How would someone go about protecting an inheritance before a
divorce? Well it's a very important area in which to take specialist advice.
Probably the first port of call would be pre and postnuptial agreements because
in that you can protect your wealth very comprehensively, provided the agreements
are done with correctly. You can also look at trusts but there are some
disadvantages to trusts because there are tax problems very often created by them
so sometimes people want to avoid that. It's really important to keep your wealth
separate if you can so not as we were discussing earlier to mingle it into the
matrimonial assets because that's going to lead to the wealth being more likely
to be shared. And finally I suppose look at actually having clear documentation
of the inheritance so the probate documents to hand and
that sort of thing so you could prove the inheritance took place which is
going to be an important factor. Your clients must often ask for a prediction
of what's going to happen during the divorce, is it possible to predict the
outcome? Well the honest answer is no not completely but it's possible to have an
educated guess and that's why people go to specialist lawyers such as ourselves where
we've got many years experience of looking at those issues and can
hopefully give realistic guidance on that, but you are still in a
discretionary area of the law. So every case is unique when it comes to
inheritance and divorce but it's really important to seek out specialist legal advice.