When parties separate, there is a common misconception that an inheritance is excluded from the property pool of the relevant relationship.
In family law, if a party has received an inheritance, or is expected to receive an inheritance, the inheritance may be included in the property pool available for distribution – as either a current or part asset, or as a financial resource. Depending on how the inheritance is categorised, the inheritance may also be considered as a financial contribution made by the party.
When assessing the treatment of an inheritance, the Court will take into consideration the following factors:
a. The duration of the relationship (e.g. short or long relationship);
b. The timing of the inheritance (e.g. before, during or after the relationship);
c. How the inheritance has been applied (e.g. held separately or jointly applied); and
d. The impact of the inheritance on the size of the property pool (e.g. the % of the total pool).
Usually, if one party has received an inheritance (‘the receiving party’) which has been applied for the parties’ joint benefit, the receiving party will receive an adjustment (as a percentage) in their favour due to their additional financial contribution during the relationship. However, this does not mean that the receiving party will receive an entitlement ‘equal’ to or more than the value of the inheritance. Simply, the inheritance is taken into consideration, whilst weighing up the parties’ other financial, non-financial and homemaker contributions.
Whereas, if the receiving party received an inheritance towards the end of the relationship (or after separation), and the inheritance has been kept in its original form and separate from the remaining assets, it is possible that the total inheritance amount could be quarantined from the property pool for the receiving party to exclusively retain.
In the event the receiving party is ‘expecting’ to receive an inheritance after separation, or the inheritance has been quarantined, then this may also be considered as a financial resource of the receiving party. When weighing up the parties’ respective future needs, it is possible that the other party, who will not receive the inheritance, will receive an adjustment in their favour on the basis of justice and equity.
Ultimately, the treatment of an inheritance will depend on the individual facts and circumstances of each case. It is important that you seek specialist family law advice regarding an inheritance in the event of a separation. Please contact our family law team on (07) 5619 5933.