FREE CHAPTER from ‘A Practical Guide to Inherited Wealth on Divorce’ by Hayley Trim


What is Inherited Wealth?

What is meant by ‘inherited wealth’ is assets or resources that are passed on to a recipient upon the death or contemplated death of the owner. Typically this will be from one family member to another – wealth passed from one generation to the next – but that need not be the case. In the context of divorce and the division of assets and for the purposes of this book it will be appropriate to include wealth that has been passed to one party to a marriage by a living individual, since it is not uncommon for inheritance arrangements to commence during the donor’s lifetime whether for tax planning or other reasons.

In White v White1 Lord Nicholls referred to “property acquired during the marriage by one spouse by gift or succession or as a beneficiary under a trust. For convenience I will refer to such property as inherited property.

The assets that are inherited could essentially be anything, and although we refer to ‘inherited wealth’ for convenience, that is not to restrict our consideration to ‘wealthy’ people.

The inheritance or gift may have been received before or during the marriage, or indeed after separation. We will examine different types of asset and the value, source and circumstances of the inheritance and the impact that such factors may have in due course.

One of the features of inherited wealth in the divorce context is that it is from a source external to the marriage which is personal to the recipient as an individual and, at least at the point of receipt, does not generally include monies earned or accrued by virtue of the recipient’s endeavours. Therefore it will often fall to be considered as a form of non-matrimonial property and the same principles will often apply.

Non-Matrimonial Property

Non-matrimonial property is not defined in statute. The concept is a creature of case law and will be considered in further detail during the course of this book. A very broad summary is to say that non-matrimonial property comprises assets brought into the marriage or received by way of gift or inheritance by one party to the marriage, together with passive growth on such assets. Or one might look at the flip side of the coin and consider what is matrimonial property or the ‘marital acquest’; property that has been acquired during the marriage by virtue of the parties’ common endeavour, and which will usually include the matrimonial home and contents, plus assets acquired for the use and benefit of the family. Non-matrimonial property may become matrimonial over time further to ‘mingling’ or other treatment. It’s immediately clear that there are grey areas, but while definitive answers may be desirable for many, it seems they have not been achievable.

The executive summary of the Law Commission’s Consultation Paper on Matrimonial Property, Needs and Agreements2 (which, as its name suggests, had proposed to report on the question of matrimonial/non-matrimonial property) records that:

At the outset of our examination of non-matrimonial property we felt that the courts’ practice of not sharing pre-acquired, gifted and inherited property might usefully be captured in the form of statutory rules. We also felt that statute should address the sort of issues that are likely to arise in the context of such property, for example when it is sold and replaced, or grows as a result of the investment of either party. These are issues to which the courts have not yet been able to provide clear answers.”

However they decided against making recommendations in respect of non-matrimonial property:

“…Although we would have liked to recommend statutory provisions to address those situations in which the case law has not yet provided clear answers, consultation responses have demonstrated that such provisions would be unacceptably controversial.”

Therefore there is nothing in statute to indicate that inherited wealth specifically, or indeed non-matrimonial property, should be treated in a particular way.

Statutory Provisions

The Matrimonial Causes Act 1973 (MCA) s25 provides that the court’s duty in deciding how to exercise its powers is to have regard to all the circumstances of the case, first consideration being given to the welfare of any minor child of the family. The courts have repeatedly confirmed that the existence of inherited wealth will be one of the circumstances of the case which the court will take into account.

s. 25(2) MCA sets out the factors that the court must consider when deciding what financial remedy orders to make and a number of these are clearly relevant to the treatment of inherited wealth:

  1. The income, earning capacity, property and other financial resources that each party has or is likely to have in the foreseeable future.

Inherited assets will be resources available to the parties in terms of the computation stage of the financial remedy process. Their inherited nature doesn’t take them out of consideration at least in assessing the extent and value of the available resources. How they are valued and then treated subsequently is considered in detail in due course. Note that resources not yet available but which are likely to be in the foreseeable future will also be taken into account. This will potentially apply to prospective inheritances depending on the circumstances.

  1. The financial needs, obligations and responsibilities that each party has now or is likely to have in the foreseeable future.

In the majority of cases, where the available assets do not exceed the parties’ needs to a significant extent, those needs will be the determining factor in the division of the assets, even where these have been inherited in whole or in part . In broad terms, if needs require it then the court will have recourse to inherited assets in deciding the overall division; as we will see most cases begin and end here3. The interpretation of needs will be further considered.

  1. The standard of living enjoyed before the breakdown of the marriage.

This is a very important factor as we’ll examine in due course. If the inherited wealth has provided for the family during the marriage and kept them in a certain lifestyle, rather than being kept separate and apart, that may justify different treatment. The marital standard of living will also inform needs.

  1. The age of each party and the duration of the marriage; and

  2. Any mental or physical disability of either party.

These factors feed into the needs of the parties and the form of and the duration for which financial provision will be required and can be afforded. As with lifestyle, the question of how long inherited assets have been enjoyed within the marriage will be relevant to assessing how they should be treated. Over the course of a long marriage the source of the assets may lose its importance, and there is a greater likelihood that inherited assets will have been mingled with matrimonial assets.

  1. The contributions which each of the parties has made or is likely in the foreseeable future to make to the welfare of the family, including any contribution by looking after the home or caring for the family.

Assets inherited by one party will usually be a contribution they have made, being from a source external to the marriage. Depending on the circumstances it may be that the inherited assets represent an unmatched contribution by one party. Where there are children, one or both parties will likely continue to make a contribution to the welfare of the family and this will be weighed in the balance; the courts are alive to the importance of avoiding discrimination. The concept of ‘special contribution’ in the context of inherited wealth will also be considered.

  1. The conduct of each party such that it would be inequitable to disregard it.

While this factor does not have a direct bearing on inherited wealth, it is conceivable that conduct by one party could influence a court’s decision as to the extent to which inherited property might be invaded in order to do fairness.

  1. The value of any benefit that a party will lose the chance of acquiring as a result of the marriage ending.

The classic example of this relates to pension assets. As a result of no longer being married, benefits such as death in service will no longer be available to a former spouse. The concept may also apply to trust assets where spouses are included within the class of beneficiaries and will no longer be so included upon divorce.

There is no hierarchy of section 25 factors and the list is not exhaustive (the court being required as already noted to have regard to all the circumstances). The consideration of these factors by the court is explored further in the course of this book.

The Future?

The Divorce (Financial Provision) Bill4 most recently introduced in the House of Lords by Baroness Shackleton in January 2020 does attempt to introduce greater predictability, defining non-matrimonial property and excluding it from the division of assets on divorce. However it has not progressed and it seems likely to be a long way down the government’s list of priorities at present.


1 White v White [2000] UKHL 54

2 Law Commission’s Consultation Paper No 343, Matrimonial Property, Needs and Agreements (26 February 2014) para 1.24 – 1.25

3 Miller v Miller and McFarlane v McFarlane [2006] UKHL 24 para 12