You married their family too: Marrying into money and the implications upon divorce

As Netflix has shown starkly with Harry and Meghan’s recent documentary, marriage sometimes brings with it a lot more than a spouse. This can have a profound impact on the marriage, including the financial relations between the parties.

Where there is multi-generational wealth, it’s common for family members to provide a helping hand to couples in the form of financial assistance. Whether it’s gifting a deposit for a home, paying for private school or funding a lifestyle, with this generation set to be the first who earn less than their parents, it’s a pattern that will likely continue and perhaps become more common. But what happens when a marriage that has been funded by family wealth attributable to one party, breaks down? In what circumstances does this “help” form part of the matrimonial pot, where it can be shared upon divorce?

The predictable answer is: it depends. The starting point is that gifts or inheritance from one spouse's family are generally treated differently by family courts than assets generated by the parties during their marriage, but there are many circumstances where this does not apply. I have set out below some of the most common ways in which family money from one spouse can become a central issue on divorce, and the key factors at play.

When your home is funded by the bank of (your partner’s) mum and dad

If your ex’s family have been involved somehow in the purchase or ownership of your home, the first questions to ask are: how is your home owned, is your name on the title, is it owned by your spouse or by their family? These questions are fundamental to your right to claim against any property. On divorce you can only claim against a property (or a share of property) that is owned by your spouse. It is not possible to claim against a property (or share of property) that is owned by their family.

The next thing to consider is where the purchase monies have come from. If the deposit for your home was gifted to your spouse by their family, then the gift will fall into the matrimonial pot and can be divided upon divorce. However, if the deposit was loaned to your spouse by their family (and it is a “hard” loan) then it must be repaid to the lender and will be excluded from the matrimonial pot. The question of whether a loan from a family member will be considered a “hard” loan centres on whether there is a real expectation of it being repaid.

Follow the money

During your marriage, was your lifestyle funded by your spouse’s family money? If so, where did the money come from: a trust, a parent, a wider family member? In the case of gifts of money from family members to one spouse, if these funds were used to support your standard of living, then they can become ‘mingled’ with other property and will form part of the matrimonial pot. The longer the marriage, the greater the risk of ‘mingling’. However, if the funds have been held in a separate bank account and not touched during the marriage, they will likely be treated as separate property and will not be shared on divorce. Particularly if there is enough money in the matrimonial pot to cover both parties’ respective needs.

In the case of money flowing from a trust, if there is a connection between the trust and the marriage, or the trust makes some form of continuing provision for both or either of the parties or any children, the court can deem it to be a “nuptial settlement” and consequently make an order to vary the trust in any way. The court can also view a trust as a financial resource of one party and make orders accordingly. This is perhaps the most common way that trust assets are brought into the matrimonial pot upon divorce. It’s important to consider where the money that you are living off is coming from, as it could make a difference to your entitlement upon divorce.

It’s not personal, it’s business

In many cases a marriage may be funded by a business held by one party or their family, or income derived from that business. In principle, where a business has been acquired or accumulated during the marriage it is deemed matrimonial property and therefore should be considered as part of a fair division of the matrimonial assets.  Though as with property, you are only entitled to make a claim against a business or share of business that is owned by your ex.  It is therefore important to understand the structure and ownership of the business when considering your claims upon divorce. In cases where there is family money that is disproportionately attributable to one party in a marriage, it’s always important to consider the ownership and source of the assets as that is key to understanding your potential entitlement upon divorce.

Please do contact us here if you would like to speak to a member of our team about any of the topics covered in this article.