It is natural to think that the inheritance you received is yours alone, or that the shares in the business you owned before you married will always be ring-fenced just for you. But if your marriage was to fail, it may come as a surprise that the Court could have a different view.
Everyone knows legal disputes can be expensive. One of the most common (and therefore potentially costly) sticking points between divorcing parties is how such assets are to be dealt with. In the context of divorce proceedings the Court will draw a distinction between assets which a couple worked together to accumulate (matrimonial property) and assets which, for example, one party has brought into the marriage, or has acquired by way of inheritance or gift during the marriage (non-matrimonial property).
In the majority of divorce cases, when it comes to the division of family property the focus is upon providing for the needs of the parties for accommodation and income. If the matrimonial assets are insufficient to meet those needs, the Court will look to any non-matrimonial property to make up the deficit. In short, needs trump any other considerations. But if the parties' needs can be met from matrimonial property there is a stronger argument for excluding assets (such as an inheritance) from the overall asset pot to be divided. In these cases, the Court will consider the type of property involved, its origins, and how that property was dealt with during the parties' marriage.
Non-matrimonial property may therefore be wholly or partly excluded from the division of the assets on divorce because it represents a contribution made by one party which is unmatched by an equivalent contribution by the other. This is particularly so in the case of a short marriage, where fairness may dictate that one party should not be entitled to a share of their spouse's pre-marital or post separation industry or windfall. But as the years pass the parties are more likely to intermingle non-matrimonial with matrimonial assets (i.e. by using the proceeds of an inheritance to pay off the mortgage on the family home). It then becomes easier to argue that the contributor of the non-matrimonial property in effect agrees to share it with their spouse, and harder (though not impossible) to argue that it should be excluded.
There is no magic formula to apply to the division of finances on divorce. How the Court will deal with non-matrimonial property differs greatly depending on the facts of each case. If such an asset is kept in a bank account in one parties' name without being used to supplement the family expenses, it may assist in supporting the argument that it has maintained its "non-matrimonial" status. Alternatively, a pre-nuptial agreement may be a useful mechanism to evidence the parties' intention that certain property be ring-fenced from the division of the parties' assets on divorce, and ultimately limit both parties' legal costs should their marriage fail.
There is no guarantee that non-matrimonial property can be saved from scrutiny and dissection in the event of divorce proceedings but to increase one's chances of keeping hold of (for instance) a cherished inheritance, it may be prudent to keep it separate from the family finances.
Article first published in Gallery - Family Law Special Edition, September 2015
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.