Written by: Farzana Naz, Director / Head of Family
Reviewed by: Saracens Solicitors Family Law Team
Inheritance and wealth during high net worth divorce cases generally turn on whether inherited wealth is treated as non matrimonial property, meaning it belongs separately to the person who received it and is less likely to be shared with their spouse, particularly where it has been kept apart from joint finances. However, this protection is not absolute, and inherited wealth that has been mixed with matrimonial assets, used to buy the family home, or relied upon to support the couple’s lifestyle over many years can lose some or all of that protected status.
The earlier these steps are taken, ideally as soon as an inheritance is anticipated or received, the more effective they tend to be at preserving its protected status.
Key Takeaways
- Inherited wealth is generally treated as non-matrimonial property in divorce proceedings, making it less likely to be shared, but that protection can be weakened if the inheritance becomes intertwined with joint finances or family assets.
- Taking proactive steps to ring-fence inheritance can significantly improve its protection, including keeping assets separate, maintaining clear records, and using prenuptial or postnuptial agreements to record the parties’ intentions.
- The way inherited wealth is used often matters more than when it was received, with funds used for the family home, joint investments or everyday family spending being more vulnerable to claims than assets kept separate and clearly identifiable.
How Inheritance is Treated by the Courts
English courts distinguish between assets that are considered matrimonial, generally built up by the couple together during the marriage, and non matrimonial assets, which include property owned before the marriage and inheritance or gifts received by one spouse individually. The sharing principle, which allows courts to divide matrimonial assets equally, generally does not extend to genuine non matrimonial property, though the court retains discretion where one spouse’s needs, or those of any children, cannot otherwise be met.
This means that in a modest estate, inherited wealth may still end up being used to meet a family’s housing or income needs even though it remains, in principle, non matrimonial, whereas in a larger estate with sufficient other assets to meet everyone’s needs, inheritance is more likely to be protected in full.
Matrimonial Versus Non Matrimonial Assets
The recent Supreme Court decision in Standish v Standish confirmed that non matrimonial assets do not automatically become matrimonial simply because they are transferred between spouses, held jointly, or moved for tax planning purposes. Instead, the court will look at how the couple actually treated the asset over time, and whether their conduct shows a shared intention to treat it as belonging to both of them.
In practice, this means inheritance kept in a separate account, used for a distinct purpose such as a personal investment, and never presented to the family as a joint resource, has a much stronger claim to remain non matrimonial than inheritance paid into a joint account and spent on daily family life over many years.
Ring Fencing Inherited Wealth
There are practical steps that help preserve the protected status of inherited wealth. These include keeping inherited funds in an account held solely in the recipient’s name, avoiding using inheritance to fund joint purchases such as the family home where possible, keeping clear records of where the inheritance came from and how it has been used, and considering a prenuptial or postnuptial agreement that expressly records the inheritance as intended to remain separate, discussed further in Prenuptial Agreements for High Net Worth Individuals.
Where inheritance is held within a family trust rather than paid directly to an individual, additional protection may already exist, though trust assets bring their own considerations, covered in Trusts and Divorce Explained.
Family Gifts and Wealth Transfers
Lifetime gifts from parents or other family members raise similar issues to inheritance, particularly where a gift is made to help a couple buy a home, start a business, or meet a specific need. Courts will look at whether the gift was intended for one spouse alone or for the couple jointly, and family members are sometimes asked to provide evidence, such as a letter or loan agreement, confirming their original intention.
Where a family wishes to make a significant gift and wants to protect it, structuring the gift as a loan, or requiring a postnuptial agreement before releasing funds, can provide considerably more certainty than an informal family arrangement.
Common Mistakes to Avoid
The most common mistake is failing to keep any record of where inherited funds came from or how they were used, which makes it far harder to argue years later that the money should remain separate. Other frequent errors include mixing inheritance freely with joint accounts, using it to fund the family home without any documentation, and assuming that inheritance is automatically protected without taking any further steps.
For a wider look at the errors that can undermine an otherwise strong financial position, see our guide to Common Mistakes Wealthy Individuals Make During Divorce.
Advising Trustees and Executors
Where you expect to inherit from a family trust or estate, it can be worth speaking to the trustees or executors involved about how funds will be paid and held, since a distribution paid directly into a joint account is far more vulnerable to being treated as shared than one paid into an account held solely in your name.
Executors and trustees are often willing to structure a distribution sensibly once they understand the family’s wider circumstances, particularly where a marriage is already under strain, so raising the issue early, discreetly and sensitively, is generally worthwhile.
Where possible, it is also sensible to discuss expectations openly with a spouse before a significant inheritance is received, rather than after, since transparency about how the money is likely to be used and kept separate tends to reduce both misunderstanding and the risk of informal assumptions developing about how the family’s finances work as a whole.
Frequently Asked Questions / Questions & Answers
Is inheritance automatically excluded from divorce settlements?
No. It is treated as non matrimonial property and is less likely to be shared, but it can still be taken into account, particularly where the couple’s other assets are insufficient to meet housing or income needs. The court will still look at the overall picture, including how long ago the inheritance was received and how it has been used since.
Does it matter when the inheritance was received?
It can. Inheritance received well before the marriage, or kept separate throughout, is generally easier to protect than inheritance received during the marriage and immediately mixed with joint finances. Family members are sometimes asked to provide evidence confirming their original intention behind a gift.
What if I used my inheritance to buy our family home?
Using inheritance to buy or improve the family home is one of the most common ways non matrimonial wealth becomes matrimonialised, since the home is usually treated as a shared family asset regardless of whose money bought it. Keeping the family home separate from inherited funds where possible is one of the simplest ways to reduce this risk.
Can my parents protect a gift they give me?
Yes, by documenting the gift clearly, considering whether it should be structured as a loan, and, where appropriate, encouraging a prenuptial or postnuptial agreement that records how the gift should be treated. Structuring a gift as a loan, with proper documentation, offers a further layer of protection.
Should I get advice before receiving a large inheritance?
Yes, particularly if you are already married or approaching marriage, since early advice on how to hold and use the inheritance can make a significant difference to how protected it remains. Speaking to a specialist solicitor before receiving or using a significant inheritance is a straightforward step that can make a real difference later.
Does it matter if my inheritance is property rather than cash?
No, the same principles generally apply, though inherited property that becomes the family home, or is used to house the family, is more likely to be treated as matrimonial than inherited funds kept separately in an investment or savings account.
What if my inheritance was received many years before I married?
Inheritance received well before a marriage generally starts from a stronger protected position, though it can still lose that protection over time if it becomes fully integrated into joint family finances, so keeping clear records remains worthwhile regardless of how long ago it was received.
Get Advice on Inheritance Divorce UK Matters
If you are concerned about protecting an inheritance or family gift, our family team can advise on practical steps to preserve it, both before and during a marriage.
Call us on +44 (0)20 3588 3500, or visit our Family Law service page to find out more about how Saracens Solicitors can help.
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