Separate property is all property of a spouse/partner that is not required to be equally shared under the Property (Relationships) Act 1976 (“Act”) when a relationship comes to an end. Generally, inheritance is separate property. However, if separate property is intermingled with relationship property (property that must be divided between spouses/partners when the relationship ends) and it is impracticable to treat it as separate property, it is no longer separate property. An example is where inheritance money is used to pay the mortgage on a family home. Accordingly, the inheritance enters the relationship property pool and is divided equally.
A contracting out agreement (“Agreement”) allows couples to determine for themselves the relationship and separate property, rather than relying on the principles of the Act to determine the relationship property and separate property.
Although inheritance may appear to be separate property, to be safe, we recommend entering into an Agreement which defines inheritance as separate property. The Agreement will arguably protect the inheritance from a relationship property claim.