It is well-known that sorting out the finances on divorce can be a complicated and lengthy process. It involves unravelling financial situations created and intertwined over the course of a marriage, which can span decades in some cases.

Often, it is obvious what has built up during the marriage and that the fair outcome is for those assets to be shared, depending on needs. However, what is the position for finances or wealth acquired before the marriage, usually referred to as non-matrimonial property? Our Family Law experts investigate.

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What is pre-acquired wealth?

The issue of pre-acquired wealth (or non-matrimonial property) was considered in the 2000 case of White v White [2000] UKHL 54. In this case, the court had to determine whether the other party was entitled to a share of a party’s pre-acquired property or wealth.

This can include pre-acquired property brought into a marriage from an external source, e.g., inheritance, gift, or property obtained by the party. It was held that, generally, a party should be allowed to keep their non-matrimonial property.

The exception to this is when the court must consider the needs of both parties, as the resources of both parties do not exceed the needs of the parties, i.e., there are insufficient resources to provide for the parties’ needs.

In these cases, the court must prioritize the needs, and this includes looking at using the non-matrimonial property as part of the resources to share in the divorce.

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What happens to the wealth acquired prior to marriage?

In cases where the parties’ financial resources do not exceed their needs, the court may include and assess the value of property obtained prior to the marriage in their total evaluation of the parties’ finances.

The judge in the case of Rossi v Rossi [2006] EWHC 1482 (Fam) provided the following summary of a court’s approach:

“The court will decide whether it [non-matrimonial property] should be shared and, if so, in what proportions. In so deciding, it will have regard to the reality that the longer the marriage, the more likely non-matrimonial property will become merged or entangled with matrimonial property. By contrast, in a short marriage case, non-matrimonial assets are not likely to be shared unless needs require this.”

As a result, there is no definite answer as to what will happen to non-matrimonial property on divorce. This depends on each case’s individual facts, including the amount of the non-matrimonial property, the needs and resources of each party and the length of the marriage.

Another important factor is whether the parties kept their wealth distinct from their joint wealth and whether the non-matrimonial property was kept separate from the couple’s finances throughout the marriage.

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What is inherited wealth?

In addition to their own pre-acquired wealth, a party may have received an inheritance from a deceased relative or friend that was passed to them prior to the marriage.

Alternatively, a party may foresee imminent receipt of an inheritance and feel that this should not form part of the resources to be shared on divorce.

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Is inheritance ring-fenced in divorce?

The position with inherited wealth on divorce is similar to that of pre-acquired wealth. Suppose the inherited wealth was acquired before the marriage and has generally been kept separate and distinct from the couple’s finances during the marriage.

In that case, the consensus is that the inherited wealth should be ring-fenced as non-matrimonial property and not shared on divorce.
However, as with pre-acquired wealth, if the parties’ resources do not exceed their needs, the courts may look to the inherited wealth to help meet both parties’ financial needs.

Likewise, if the inheritance is received during the marriage and has been used by both parties, held in a joint bank account or used to contribute to the purchase of a marital asset or property, then the court will likely take this into account when sharing the assets.

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Is future inheritance considered in divorce?

The position with future or expected inheritance is different. This is because the amount and receipt of the inheritance usually need to be made clearer for the court to consider.

S.25(2)(a) of the Matrimonial Causes Act 1973 sets out that when assessing the finances on divorce, the court may have regard to ‘other financial resources which each of the parties to the marriage has or is likely to have in the foreseeable future’.

Future inheritance is usually too uncertain and unknown to be relied upon as a financial resource and is generally not considered part of the financial resources during divorce proceedings.

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How to protect pre-acquired or inherited wealth?

If you want to protect your assets and pre-acquired wealth on a divorce, the best protection method is to enter into a prenuptial agreement.

This agreement can identify and set out the items of non-matrimonial property and then set out how these are to be protected following any divorce, including those not included in the finances to share on divorce.

A prenuptial agreement is not automatically legally binding in this country at the moment, but the courts are upholding the terms of a prenuptial agreement, provided that certain safeguards are in place.

Therefore, if you have any significant or valuable pre-acquired wealth or inheritance, it is recommended to arrange for you and your partner to enter into a prenuptial agreement before marriage to try and ring-fence, or at least indicate intended separation or protection of, your pre-acquired assets in the event of any future divorce.

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