When a couple separate an issue that frequently arises is the issue of inherited or gifted assets. Usually a spouse is anxious to know if inherited assets will be treated as part of the marital assets or whether these assets will be ringfenced as the assets of that spouse only.
The answer is it depends on the circumstances of the case. The legislation does not specifically deal with the issue of how an inheritance should be treated. However, the legislation does allow a Judge to take inherited assets into account in deciding what is proper provision for both spouses following a separation and a Judge has enormous discretion in this regard. So what is the practise of the Courts in dealing with inherited assets?
The leading Irish case in this area was the case of C v C. The main asset in this case was a landed estate which had been inherited by the husband and which had been in his family for generations. The gross value of the assets were over €30 million and the wife was seeking to have the manor house transferred to her. Mr Justice O’Higgins refused to transfer the house to the wife and said:
“The Applicant (husband) has a strong claim to the house. Firstly he is the sole owner. Secondly he has family connections with it for a very long time. Thirdly the Respondent (wife) did not contribute either directly or indirectly to its acquisition as the house was inherited.”
The husband in this case had an after tax income of €750,000 and the Judge awarded the wife a lump sum of €3.3 million to purchase a family home for herself and the children and maintenance of €320,000 per annum for herself and the children. Therefore in “big money” cases the Court is unlikely to give a spouse a significant proportion of the inherited assets of the other spouse, particularly if the inheritance was quite recent.
But what if the case is not a “big money” case? Here the main determining factor is usually the respective needs of the parties and in such cases therefore the Court is more likely to take inherited assets into account when deciding what is proper provision each party. However, a Court must take account of the judgment of the Supreme Court in the recent case of GvG in which the Supreme Court stated that inherited assets should not be considered to be assets of the marriage.
The date when the assets were inherited is also a factor – if the inheritance was received a long time ago it is more likely to be included in the assets to be divided between the parties.
It is therefore important to take advice in relation to inherited assets when a relationship breaks down or indeed when contemplating making a will or getting married.