In family law disputes it is a common misconception that an inheritance or other large sum received after separation will not be included in the property pool to be divided between the parties.
The issue has been highlighted in many cases before the Family Court including inheritances, lottery wins and other 'windfalls' received by one of the parties after the relationship has ended.
Once parties have decided to separate, ideally they should finalise outstanding property and financial issues without delay. However the particular circumstances may not allow this to occur.
Parties who are divorced have 12 months from the date when the divorce becomes final in which to file a Application for Property Orders. De facto parties have two years from the date of final separation. Only in exceptional cases will the Court grant leave to a party to file an application 'out of time'.
What happens if one party receives an inheritance after the break-up?
In Calvin & McTier  FAMCAFC 125 the Full Court of the Family Court of Western Australia heard an appeal by a husband who argued that an inheritance received four years after the parties separated should not be included in the property pool to be divided between him and his ex-wife.
At trial, the Court heard that the parties were married for eight years and divorced in 2011. They had one child who was five years old at the time of separation. Three years later the husband received an inheritance from his father's estate. The Court granted the Wife leave under section 44 (3) of the Family Law Act to pursue a property settlement claim.
The Trial Judge included the husband's post-separation inheritance in the parties' property pool available for division. The inheritance of $430,686 accounted for about 32% of the asset pool. The husband argued that his inheritance should not be included in the pool because there was no connection between the inheritance and the parties' matrimonial relationship.
On appeal, the Court disagreed with the husband. The Court determined that there did not need to be a direct connection between the marriage and the item of property, rather that 'property' includes property of the parties, or either of them, at the date of hearing. The husband's appeal was dismissed.
The Full Court approved this decision in two other cases, Holland & Holland  FamCAFC 166 and Widmann & Widmann  FamCAFC 602.
There is another issue to consider when an inheritance or other asset in dispute is included in the asset pool. The Court will make an assessment of the financial and non-financial contributions that each party has made to the acquisition and maintenance of the assets. This is not always a simple task.
In Calvin & McTier the effect of the husband's inheritance being included in the asset pool was that he was considered to have made a greater financial contribution. Although unsuccessful in having his inheritance "quarantined", his contributions were determined at 75%, and after making a 10% adjustment to the wife for future needs, the Court divided the property pool 65% to the husband and 35% to the wife.
In summary, the Family Court continues to retain a discretion as to how to treat items of property that are acquired after separation. There is therefore no single way the Court will deal with these assets, so it is important to obtain legal advice about your particular circumstances before you make any decisions about dividing property with your ex-partner.
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.