Inheritances make up a complex and varied area of law. Whilst the Family Court has provided some general principles with respect to how the law is applied in this area, how it deals with inheritances in a marriage or de facto relationship will depend on the facts of the particular case. So, how are inheritances actually treated by the law? How are they assessed and divided in the event of separation?

Inheritances are treated as contributions made on behalf of a party to a marriage or de facto relationship. That means that in the event of a separation or divorce, any inheritances received are assessed as a part of the asset pool to be divided amongst the parties. Inheritances can form a significant part of the asset pool and in some cases the bulk of the asset pool. The weight given to any inheritance therefore will have a significant impact on the division of property.

Court Considerations

The Court has a wide discretion when dealing with inheritances. The impact of the inheritance on the overall division of the property pool will depend on a number of factors including the following:

• When the inheritance was received (i.e. early or late in the relationship or marriage, including after separation)
• The size of the inheritance
• The relative size of the inheritance compared to the rest of the asset pool
• How the inheritance was used
• Whether the inheritance was kept separate
• The other contributions made by the parties
• The length of the relationship or marriage

This is not an exhaustive list.  As indicated every case is different and there may be other factors or a combination of these factors that may come into play. Few people realise that prospective inheritances are generally irrelevant to any property proceedings. What you may receive in the future from an inheritance is not taken into account except in rare circumstances. One such circumstance might be where the Testator – the person leaving the inheritance – has lost their ability to change their will through mental infirmity. However, even in this circumstance, certain conditions must be met.

What happens when an inheritance is received late in the relationship?

Generally speaking, if an inheritance comes very late in a relationship or marriage or after separation it will be treated very differently to the rest of the asset pool. In effect, if there are other assets to be divided it will largely be “quarantined”. Again, this is not a hard and fast rule and will depend on all of the circumstances of the case. If the inheritance is quarantined it will still be a significant factor in any division of assets. This is because it will be seen as a financial resource in the hands of the person who inherited. This may mean that that party receives a lesser percentage of the rest of the assets.

What happens when an inheritance is received early in the relationship?

An inheritance received earlier in the marriage may still be a factor in favour of the party who inherited it but the weight given to that factor will depend on the length of the relationship and all of the other contributions that may or may not have been made by both parties. Like most aspects of Family Law this is a “grey” area. It is complex and will always depend on the particular circumstances of the case.

We at Freeman Family Law have a vast experience in financial cases and the impact of inheritances. When an inheritance is involved, advice and representation from an experienced expert is required. If any of these issues resonate with you don’t hesitate to contact us for an expert assessment of your case.