Inheritance can be a tricky point in a divorce. Inherited funds that are paid to one spouse during a marriage are not matrimonial property. However, in practice, this is not always straightforward.
Many people use inherited funds to upgrade their property, buy a new house altogether or to pay down a mortgage. The inheritance then gets tangled into a matrimonial asset or debt. Years can pass and people don’t usually keep detailed records to show what was applied where. If the issue becomes live at the point of the divorce, the person who received the original inheritance may have to ask the court to apply discretion to recover some or all of those inherited funds with no guarantee of recovery.
For this reason, clients often ask us whether there is anything they can do to protect inherited funds they have already received or a future inheritance before they get married. The answer is yes, you can ringfence your inheritance by entering into a pre-nuptial agreement, commonly referred to as a pre-nup.
What is a pre-nup?
So, what exactly is a pre-nup? It is a formal and legally binding contract entered into by you and your future spouse. Within this agreement, both parties outline the terms that would govern the division of assets in the event of a divorce or separation. Typically, it covers financial aspects such as property, money, and debts, but it can also encompass significant matters like children and the protection of any inherited funds received during the marriage.
In recent years, there has been a substantial increase in the number of prenuptial agreements. According to a recent report from Co-op Legal Services, the demand for pre-nups has more than doubled in the past 12 months. People are becoming much more informed about the potential consequences of marrying then separating in the future, and recognise the value of discussing and agreeing such matters from the outset.
How can a pre-nup specifically protect your inheritance?
A pre-nup can ringfence a potential future inheritance alongside protecting existing assets or sums of money intended to be passed on as an inheritance to someone else. For instance, if you’re remarrying and wish to secure a portion of your wealth for children from a previous relationship, a pre-nup can keep these assets separate from any that are divided during a divorce, all with the agreement of your future spouse.
A pre-nup also provides an opportunity for both parties to establish their expectations regarding financial positions in the future. This includes determining whether you’re comfortable sharing existing personal assets and debts or if you would prefer to keep these aspects separate.
If I’m getting a divorce, will my inheritance be included in the division of assets?
If you’re considering getting a divorce, we would ask you about whether any inherited funds had been received during your marriage and how these had been used. If they were used on living costs and holidays, sadly those funds are gone. If you had invested your inheritance into a matrimonial asset or debt, we can discuss what we would need to do to prove this and consider your prospects for being able to recover all or part of those funds. This would be considered with regards to all of the circumstances of your separation.
How can Johnson Legal Family Law help me?
Open communication about financial matters is key in any strong relationship, and a pre-nuptial agreement can protect you both in the future if you did decide to separate.
Johnson Legal Family Law is providing a 10% discount on prenuptial agreements through the Edinburgh Wedding Directory website. Check us out under “suppliers” and then “essential extras”.
If you would like to discuss or find out more about a pre-nuptial agreement, we offer all our clients a free, 15-minute consultation call with one of our solicitors to determine how we can help. Call our office on 0131 622 8477, email [email protected] or submit your enquiry here.
