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Should Inheritance Be Included in the Joint Pot During Divorce or Should You Try and Hide It?

September 09, 2019  |   Posted by :   |   Blog,Uncategorized

Trying to hide your assets from your partner during divorce is never a good idea – inevitably you will be found out and non-disclosure where you have signed a statement of truth is a contempt of court and a very serious matter, likely to land you in a far worse financial situation than if you declared and included all assets in the pot.

In a recent case, a woman attempted to temporarily ‘gift’ away a large sum of inheritance to her builder with the aim of keeping it out of her divorce. The two had become friends during plans to build an extension, and Mrs Byrne disclosed that she intended to separate and ‘needed to place her assets out of reach of her husband’. The builder, Stephen Howie, suggested that she transfer £600,000 to him, assuring her that he would ‘repay it any time’, but the deal came back to bite her when – surprise, surprise – her benevolent helper decided to keep the money, claiming it was a legitimate investment in his business, and has now fled to Japan. Mr and Mrs Byrne decided to reconcile over a family holiday and have since battled to retrieve the money from Mr Howie, taking their case to the High Court, but so far have been unsuccessful. A judge also asserted that if they had gone ahead with the divorce, Mrs Byrne’s attempt at hiding the money would have ‘almost certainly failed’.

There are two main issues here. First, giving money to someone in the hopes of disguising your assets is never a good idea – even if it’s a close friend or family member. As the judge on the case pointed out, non-disclosure is rarely successful, will very likely lead to a huge amount of legal costs to rectify, and can be penalised by the court – even resulting in the fraudulent party having to pay their ex’s legal fees.

The division of assets requires disclosure of all your finances with documentary evidence, and there is always a paper trail. Bank statements alone will usually show if someone is trying to give money away. While the process of disclosure is seen by some as an unnecessary expense, unless you know every detail of your spouse’s finances, you could end up making decisions about your financial future without the necessary information to do so. Imagine, for example, that you agreed on a financial settlement without disclosure, then, months down the line, discover your ex has bought a Ferrari and is going on expensive holidays when there was nothing in the joint pot to suggest this was possible… At this point, there would be nothing you could do besides spending another 6-12 months revisiting the settlement on the basis of non-disclosure, potentially costing you both a huge amount more in legal costs. Hindsight like this really isn’t worth the price, and no matter how well you think you know your spouse, it always pays to follow the disclosure process to the letter.

The second issue is how to deal with inheritance during divorce. Understandably, if a person inherits a significant amount of money, they may feel as if it should not rightly be included in a joint pot. (We’ve spoken more about the grey areas in dividing up assets here.) Whether or not inheritance is considered in a financial settlement really depends on the circumstances. For example, if the money is inherited early in the marriage and used for major purchases within the relationship (such as buying the family home, family holidays, refurbishments and general household expenses) it will most likely be considered part of the joint pot. However, if the money is inherited during or at the end of the marriage and always kept separate from family finances, it may not be included in the joint pot and the other spouse may not have a claim over it. However, the court can and will, if necessary, take into account any financial resource available if there are not sufficient funds for a settlement. In this case, it may be that the spouse without inheritance is awarded more of the remaining marital pot.

Of course, every situation is different, and will be considered on an individual basis, but the most important advice to take from all this is:

  1. Full disclosure is a necessity for financial settlement and you will be found out if you try to hide or disguise assets during the divorce process.
  2. If you’re concerned about inheritance, personal savings, or any other assets you think should be excluded from the joint pot, you will generally need to prove that the money has been kept separate from shared finances. Decisions about assets like this will largely depend on when the money was received, what it was used for, and what else is available for the settlement.
  3. In all circumstances, independent advice from a solicitor is the best way to ensure that you are getting the fairest result from a financial settlement.

To speak with a solicitor about any of these issues, or to discuss your legal needs with a free 45-minute family law consultation, get in touch with Frances Lindsay & Co. We have offices in Maidenhead and cover the whole of the Thames Valley and south Buckinghamshire including Beaconsfield, Gerrards Cross and Bourne End. Our friendly family law team are here to take the weight off your shoulders with a wealth of experience and a down-to-earth approach. Call us on 01628 634667 or email info@franceslindsay.co.uk to see how we can help.

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