Inheritances are often a contentious issue in family law property settlements due to the emotional significance that is attached to them.
It is generally the case that one party will seek to have the inheritance included in the property pool (usually the party that has not received the inheritance) and the other party will seek to exclude the inheritance from the property pool and retain it in accordance with the wishes of the Willmaker.
Unfortunately, there is no definitive answer as to whether an inheritance should be included in the property pool. This largely depends on the circumstances of each caseand the terms of the Will under which the inheritance was received.
If the Will has been carefully drafted to ensure that the inheritance is held within a testamentary trust instead of being held by the individual personally, it is most likely that the inheritance will be excluded from the property pool.
In situations where the individual has received the inheritance in their own name, generally, the Court will take into account the following matters:
1. Who the inheritance was intended for
Often it is clear which party was to receive the inheritance. However, there have been cases where the inheritance was intended to be gifted to both parties to the marriage. In these cases, the inheritance will be a consideration to be part of the property pool and will not warrant an adjustment favouring either party (as both parties received it equally).
2. When the inheritance was received (before, during or after the marriage)
If the inheritance was received before or during the relationship it is likely that the inheritance will be included in the asset pool or would be regarded as a contribution to the marriage by the party who received the inheritance and an adjustment would be made in their favour. However, this will depend on further considerations such as the length of the relationship and the contributions of the other party.
If the inheritance was received toward the end of the marriage/relationship there is a higher likelihood that the inheritance will be excluded from the property pool and an adjustment will be made in favour of the other party on the basis that the receiving party will have the benefit of the inheritance moving forward (that is, a financial resource).
3. The length of the relationship and contributions of the other party
If the marriage/relationship was quite lengthy (i.e. 20 or 30 years) and the inheritance was received early on or in the middle of the marriage/relationship, then it may be the case that the other party, over that period of time, has made significant financial or non-financial contributions to the marriage. This may work to balance out the contribution of the inheritance and there would likely be no adjustment for that inheritance.
4. Expecting an inheritance after separation
In circumstances where you have separated and one party may be expecting to receive an inheritance (from a person that has not yet passed) the Court often takes the view that this is not to be taken into consideration at all as part of the property pool or a future factor. This is because there is uncertainty as to whether the inheritance will actually be received by the party. The only exception to this general principle is if the death of the person leaving the inheritance is imminent, and it is likely that the person will receive the inheritance in the foreseeable future.
Determining whether an inheritance should be included in the property pool is a difficult task and will depend on the individual circumstances of each matter. It is important that you seek legal advice as to how to deal with any inheritance you or your partner may have received before during or after the relationship.
If you would like further information regarding your family law matter please contact our Toowoomba Family Law Team.
This publication has been carefully prepared, but it has been written in general terms and should be viewed as broad guidance only. It does not purport to be comprehensive or to render advice. No one should rely on the information contained in this publication without first obtaining professional advice relevant to their own specific situation.