Navigating Post-Separation Property Settlement When You’ve Received an Inheritance

Following a separation, dividing your assets can sometimes be a very stressful experience, especially in circumstances where there are additional assets, such as an inheritance, involved.

An inheritance usually comes in the form of money, property, and personal belongings such as jewellery and appliances following the death of a family member or loved one. We have a number of enquiries regarding whether you can “hide” the fact of an inheritance from a former husband/wife/spouse/defacto in the context of family law property settlements.

The court the case of Bonnici & Bonnici[1] outlined that an inheritance is not protected from family law matters however, they also noted that the division of an inheritance still depend upon the circumstances and variables of each case.

Generally speaking, the variables that the court may consider are as follows:

  • When was the inheritance received? Was it prior to the relationship, during or after the relationship ended?
  • How long was the relationship for?
  • Was the inheritance used for the benefit of the relationship, such as buying property?
  • What relationship and contributions did each party have with the person who bequeathed the inheritance? (Including both financial and non-financial contributions)
  • Could the inheritance be considered a contribution to the matrimonial asset pool or family rather than one individual person?
  • Has the inheritance been received yet, or is it expected to be received?

The court will distribute an inheritance as part of a property settlement dependent on the circumstances outlined by responses to these questions.

Once the court has determined the financial and non-financial contributions of each party in relation to the inheritance, they will then assess at the future needs of each party. Based on section 75(2) of the Family Law Act[2] the court can take into account the age and health of each of the parties, care of children, the earning capacity of each party and any financial resources they each may have.

These considerations may affect the outcome of how the inheritance is divided, if one party is primarily caring for their young children and therefore does not have the same earning capacity as the other party the court will divide the asset pool in their favour to ensure their future needs are met.

There is no cookie cutter solution to dividing assets particularly when the division involves an inheritance. There are so many variables that the court must consider before determining the outcome of a property settlement. Many of our clients come to us stating “It’s 50/50 according to the law”. Respectfully, this is not correct in accordance with Australian Federal Law under the Family Law Act 1975 (Cth).

Usually, an inheritance that was received prior to or during a relationship will most likely be treated as an asset that can be distributed between the parties. An inheritance received post-separation however, may be excluded from the main pool of assets but can still be divided depending on other factors. We understand that there is a large and confusing grey area when it comes to property division however we are always prepared to assist.

  • Paris Drinkwater

[1] Bonnici & Bonnici (1992) FLC 92-272

[2] S 75(2) Family Law Act 1975 (Cth)