In any divorce settlement the judge, and indeed the parties' solicitors in their advice to their clients, apply criteria set down in statute in order to ascertain what would be a reasonable financial settlement given the circumstances of that particular case.

However, the issue of wealth inherited by one party either prior to or during the marriage can have a varied affect on the case, depending on a non-exhaustive list of factors including the length of the marriage, whether both parties' needs and those of any children can be met without using the inheritance as a resource, how the parties arranged their financial affairs during the marriage and the standard of living the parties enjoyed.  

The High Court case of K & L in July provided a further example of how an inheritance can impact on the financial settlement of a divorce after a long marriage.  After a 20 year marriage or more, one begins by looking at a 50:50 division of assets on the basis of equality but this is simply an aid to settlement and not a rule.  Equal division of assets can and is departed from when fairness requires it.

The facts were as follows:

• This was a 20 year marriage with 3 children.  The wife was aged 51, the husband aged 48.
  
  
• In 1973 (13 years before the parties met), the wife inherited shares in a company from her grandfather.  These shares were held in her name throughout and were never intermingled with the husband’s assets.
  
  
• The wife’s inherited assets were the only source of financial support during the marriage.  The husband had not worked and made no financial contribution.
  
  
• The total assets at trial were approximately £59million, comprising wife’s of £58.8m, husband’s of £320,000.
  
  
• The parties lived modestly during the marriage in the context of the wife’s wealth.  The family home was a 3 bed house outside London worth only £225,000, they had an old car and the children were state educated.
  
  
• Their combined expenditure a year as a family during the marriage was approximately £79,000.  However, in the divorce the husband sought £105,000 maintenance a year for himself.
  
  
• The wife offered a £5 million lump sum in full and final settlement.  Husband sought £18m, to include a property in or around Regents Park of around £2m.

It was held that the husband would receive a lump sum of £5 million in accordance with the wife’s proposal which, when added to the assets in his own name, gave him approximately 8.5% of the total marital assets.  Mr Justice Bodey commented:

• The inherited assets were a factor of “central relevance” and justified departing from equality.
  
  
• The wife’s offer generously meets the husband’s needs and more. Even if the husband chooses to buy a £2m property in Regents Park, investing £3m will provide him with an income of £130,000 per annum, far more than the parties lived on a year during the marriage.
  
  
• “It is self-evident that the concept of “sharing” requires special thought and reflection in respect of assets not the product of the direct or indirect efforts of the parties jointly”.
  
  
• The modest standard of living enjoyed during the marriage is a “key feature” of the settlement.

The outcome ensures that the financially weaker husband is able to continue the standard of living enjoyed during the marriage whilst preserving for the wife the inheritance she received many years before the marriage.  The husband’s costs were also paid by the wife, allowing him to be debt free and invest his £5m to fund his future capital and income needs.

This is a common-sense outcome and one which is likely to prevent any appeal by the husband.

For further information please call Deborah Jeff on 020 7725 8041 or email her by clicking here