Inherited Property ‘Invaded’

A couple’s assets on divorce can include matrimonial property – i.e. assets acquired during the course of the marriage – and non-matrimonial property, which is commonly defined as property acquired before the relationship began or property that was inherited by or given to one party during the relationship.

The Law Commission recently carried out a consultation on the future treatment of non-matrimonial property on divorce and how it should be divided after the needs of the divorcing couple have been met. The Commission’s preference is that non-matrimonial property should not normally be shared but should remain with its original owner insofar as it is not required to cater for the needs of the divorcing couple.

The use of inherited property to satisfy a couple’s needs is illustrated by a recent high-value divorce case. The couple involved married in 1984 and went on to have five children together. The husband came from a wealthy family and the couple’s lifestyle was an expensive one. The judge hearing the case said that they lived the life of the ‘landed gentry’.

At the age of 25, the husband had inherited a substantial country estate from his grandparents, which at the time of the hearing was valued at nearly £36 million. After deduction of fairly substantial liabilities, the couple’s net assets amounted to £26.88 million.

The wife claimed £11.2 million (or 42 per cent of the net assets) whilst the husband offered £7 million (or 26 per cent of the net assets).

After consideration, the High Court awarded the wife £8.7 million (or 32.5 per cent of the net assets). The judge found that this sum was necessary to meet the wife’s financial needs and, although in making the award the judge recognised that she was ‘invading’ the inherited assets, she regarded this as inevitable in order to cater adequately for the wife’s financial future.

It would appear that, had the Law Commission’s recommendations in this area been implemented, the outcome of this case would not have been affected as the intention is that, where there are insufficient other assets to meet the needs of the divorcing couple, inherited property may well be added to the ‘pot’ in deciding the division of financial assets between them.

Our family lawyers are experienced in helping clients negotiate financial settlements on divorce.