A question that frequently arises is that of what happens to inherited or gifted assets. Frequently a spouse is anxious to know if inherited assets will be treated as part of the marital assets or whether these assets will be considered to be part of the assets of that spouse only.

The short answer is that it depends on the circumstances of the case. Legislation does not specifically deal with the issue of how an inheritance should be treated. However, a Judge is allowed 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.

The leading Irish case in that of C v C. The main asset was was a landed estate which had been inherited by the husband and which had been in his family for generations. The value of the assets were over €30 million and the applicant, the wife was seeking to have the country house transferred to her. Mr Justice O’Higgins refused to do so and his reasoning was as follows:

“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 cases involving assets of significant value 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 does not involve assets of significant value? 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 G v G in which the Supreme Court stated that inherited assets should not be considered to be assets of the marriage. In that case the separation agreement was firstly considered. The husband submitted that he made proper and permanent provision which was intended to be in full and final settlement. Chief Justice Denham set out general principles such as:

a separation agreement should be given sufficient weight;

that a clean break is a legitimate expectation in Irish law;

proper provision is not redistribution of wealth;

if the circumstances of the spouses have changed significantly and this should be considered by the court.

Examples of a change in circumstances to be considered include an illness or a change in the value of assets.

If a spouse for instances inherits wealth unconnected to an investment during their marriage the other spouse is not automatically entitled to a share in the wealth or further money. The length of time since the separation agreement will be considered. It is notable that it was considered that the standard of living of the spouse seeking assets should be judged on the standard of living before they lived apart. Inherited assets will not be treated as assets obtained by both parties in a marriage.

G v G is a significant judgement dealing with a very important issue.

It is important to take advice in relation to inherited assets when a relationship breaks down.