When should future inheritance prospects affect a financial settlement upon divorce?

Before negotiations can start about how finances should be shared between a divorcing couple, disclosure needs to be provided by both parties to establish what the finances are. This is usually done using a form called a form E, which includes a question about whether there are any other relevant circumstances, which may affect the outcome, such as inheritance prospects.

It is rare that inheritance prospects will have an impact on the way finances are divided upon divorce. Wills change and assets may be needed to fund residential care. However, in a recent case, the Court of Appeal had to review a decision by the High Court to limit the wife’s award because she was expected to receive a substantial inheritance in the future. The parties were married for 14 years and had three children. The husband had an earning capacity of £350,000 and assets of £15million. The wife looked after the children and had no assets but she received financial support from her father, a very wealthy Saudi businessman. In addition to a lump sum of £2million, the judge ordered that the wife have sole occupation of two London flats until her remarriage or her father’s death, whichever was sooner.

This case was unusual because Saudi “forced heirship” laws meant the wife’s inheritance prospects were certain. However, notwithstanding this, the Court of Appeal allowed the wife’s appeal, ruling that in a case where the assets were substantial such as this, the wife should receive sufficient capital from the divorce to enable her to rehouse outright in her own name. This reasoning begs the question whether the appeal would have been dismissed if the matrimonial assets were so much less requiring the wife to rely upon the inheritance she was to receive in the future. However, even though the inheritance may have been a certainty, the wife’s father’s life expectancy was not. Therefore, to determine a financial order based on inheritance prospects to be received at some unknown point in the future would be unfair.

The outcome may differ if a divorcing spouse is about to receive an inheritance imminently. If such inheritance prospects are not disclosed but are later discovered, the other spouse may have a case that the financial order should be revisited. They may succeed in seeking a more favourable outcome because their former spouse now has other resources available to them.