Niccolò Machiavelli once famously remarked, 'A son
can bear with equanimity the loss of his father, but the loss of
his inheritance may drive him to despair.'
The treatment of inheritances often results in bitter disputes
between warring parties in family law property settlements. This is
perfectly understandable; the party who received the inheritance
will no doubt believe they should retain all of it in accordance
with the wishes of the deceased. Alternatively, the other party may
argue that the inheritance is an asset of both parties and they
should be entitled to share in any benefit.
It is interesting to note that, for family law purposes, an
inheritance will only be taken into account in circumstances where
it has actually been received by one party or where it is likely
that a party will receive an inheritance in the very near
future.
Parties will often approach their lawyer demanding to see a copy
of the Will of their former partner's remaining parent or
grandparent claiming that the former partner is going to receive
significant funds from the estate. It makes little difference to
the property settlement whether that family member is worth
millions or very little – the Family Law Courts will not
be interested in a possible inheritance the former partner might
one day receive in the absence of evidence showing that the
entitlement is more than speculative.
Consider circumstances where you and your former spouse are
involved in property settlement negotiations and one of the key
issues is how you are going to treat an inheritance received during
your marriage. What should you do?
The family law approach to the treatment of inheritances varies
depending on the following factors:
the timing of the inheritance i.e. before the commencement of
cohabitation, during the de facto relationship/marriage, or after
separation;
whether the party who did not receive the inheritance could be
said to have made a contribution to it; and
the size of the inheritance.
In light of those factors, the court will determine whether the
inheritance should be considered as a 'contribution' on
behalf of either or both of the parties or if the inheritance
should be excluded from the property pool, with an adjustment made
to the party who does not receive the benefit of the
inheritance.
The approach you adopt to the treatment of the inheritance will
therefore vary depending on which side of the fence you are
sitting. If the inheritance is significant, for instance the size
of the property pool, and you are the party who received it, you
would be more likely to argue that the inheritance should be
excluded from the pool with an adjustment made to your former
partner; this will probably provide you with a higher overall
property entitlement.
On the other hand, if you are the party who did not receive the
inheritance and it has a significant value it is likely to be to
your advantage to have the inheritance included in the pool with
you to retain a smaller percentage of the overall pool.
Generally speaking, if an inheritance is received in the early
or middle stages of a long marriage or de facto relationship it
will be included in the pool for distribution and considered as a
contribution on behalf of the party who received it. Inheritances
received post-separation are usually excluded from the property
pool and an adjustment is made to the other party in light of other
party's retention of the inheritance.
It can be difficult to know how to treat an inheritance in a
property settlement and each matter will turn on the unique facts
of the particular case.
At Cooper Grace Ward we have an experienced family law team
available to assist you with any queries you may have regarding the
treatment of inheritances or property matters in general.
It may also be helpful to speak with one of our solicitors if
you have, or anticipate receiving, a significant inheritance and
wish to consider entering into an agreement with your spouse or de
facto partner about how the inheritance will be treated in the very
unfortunate event of separation.
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The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
Specific Questions relating to this article should be addressed directly to the author.
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