It can often be a point of contention between parties involved in a family law dispute as to how inheritances should be treated, particularly when they are received post-separation.
The recent decision of Shnell & Frey [2020] FamCA 631 dealt with this issue, in addition to dealing with how Capital Gains Tax should be considered and issues relating to Family Trusts.

The Husband and Wife were aged 68 and 62 years of age respectively. The relationship was one of 35 years. Both parties received inheritances in this case. The Husband receiving an inheritance of approximately $530,000 late in the relationship. The Wife receiving an inheritance in the amount of $2,550,026 some 4 years after separation.

The Wife contended that the inheritance should form part of a separate property pool, with her to receive the entirety of the inheritance in addition to a division of the other assets. The Husband contended that the Wife's inheritance should be included in one pool of assets available for division between the parties.

The Judge considered it appropriate for the Wife's post-separation inheritance to be included in the property pool. The post-separation inheritance was considered to be a significant contribution by the Wife , however that it was one of "myriad of contributions" made by the parties in the context of the long marriage. The Judge found that a substantial amount of the husband's inheritance had been utilised towards improving the family home. The Wife accepted this.

When considering the respective contributions of the husband and wife, the Judge reached the following conclusion: "Overall, I consider that the myriad of contributions made by each party should be assessed as largely equal although slightly favouring the wife because of the disparity in the inheritances/gifts and the timing of the wife's inheritance".

There is no one rule for how inheritances should be dealt with. To quote the Court's decision in Bonnici & Bonnici (1992) FLC 92-272 "A property does not fall into a protected category merely because it is an inheritance. On the other hand, if there are ample funds from which an appropriate property settlement can be made and a just result arrived at, the fact of a recently acquired inheritance would normally be treated as an entitlement of the party in question"

If you or your previous partner have received an inheritance, it is important to seek appropriate legal advice as to the best approach to be taken depending on the facts of your case prior to entering into an agreement to effect a property settlement.

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.