09th Sep 2021

Divorce – Do I Have To Share Pre-Acquired Or Inherited Wealth?

By Vanessa Sampaio

Divorce – Do I Have To Share My Pre-Acquired Or Inherited Wealth?

In this blog, FLiP Associate Vanessa Asante explains the difference between matrimonial and non-matrimonial assets and how the court may deal with these assets on a divorce or separation.  

When it comes to dividing the finances on divorce, there is a fundamental difference between how the family court treats assets that are ‘the product of marital endeavour’ such as assets generated during the marriage and classed as ‘matrimonial property’, and ‘non-matrimonial property’, namely assets which are not the product of marital endeavour, for example, pre-acquired and inherited wealth.

The reason that this is so important is because the Court will apply the sharing principle to the division of matrimonial property with the starting point being an equal division of those assets between the parties. In contrast, as confirmed by the Court of Appeal in Hart v Hart [2017] EWCA Civ 1306, the sharing principle applies with limited or no force to non-matrimonial assets.

This different approach to matrimonial and non-matrimonial assets means that in some cases it may be possible for non-matrimonial assets to be ring-fenced.  However the extent to which this will be appropriate will depend on the facts of each individual case and will be heavily dependent on two particular factors; the needs of the parties and the way the non-matrimonial assets have been dealt with by the parties during the marriage.

As to needs, the court will always have regard to the parties’ needs, and in particular their need for re-housing. Needs are the overriding factor, and therefore the court can ‘invade’ non-matrimonial assets to ensure needs are met. The converse of this, as set out by Mr Justice Mostyn in the case of JL v SL [2015] EWHC 360 (Fam) is that it would be very rare for the court to share non-matrimonial assets in circumstances other than to meet the other parties’ financial needs.

The other circumstance, mentioned above when the Court will look to divide non-matrimonial assets is when these have been ‘matrimonialised’ or ‘mingled’ with the existing matrimonial pot and have therefore lost their ‘non-matrimonial’ character. One example of this could be when inherited funds are mixed with joint funds rather than being kept separate, or if a pre-acquired property becomes the family home. Depending on the circumstances of the case, situations like these can lead to arguments from one side that the ‘mingled’ property should be subject to being shared equally between the parties, and opposing arguments that there should still be some degree of ringfencing.

In the recent case of WX v HX [2021] EWHC 241 (Fam), the husband argued that his management of the wife’s portfolio of non-matrimonial assets over several years had resulted in the underlying trust assets becoming ‘matrimonialised’. In this case the trust assets had been preserved with only the income being used by the wife for her and the children’s personal expenses and for paying tax arising on the trust. The Court found that the husband’s management was not sufficient to ‘matrimonialise’ the assets and the wife was permitted to ringfence her extensive wealth. It is notable that in this case the parties’ needs were met from the matrimonial pot.

Arguments that non-matrimonial property have taken on a different character by virtue of the way in which the parties have treated the property over the course of the marriage can be complex and difficult to make. The prudent thing to do in order to protect non-matrimonial assets is to enter into a pre-nuptial agreement before getting married. Alternatively, the non-matrimonial assets should be kept entirely separate from the marriage, although as mentioned before the caveat to this is that the court can always have recourse to non-matrimonial assets to meet the other spouse’s needs.

To learn more about how the talented team of family law specialists at FLiP can support you with your family law issues, please contact us at T: 020 7420 5000 or E: hello@flip.co.uk