Inheritances in Property Settlements

How the court will deal with inheritance when making orders in a property settlement depends on the circumstances of the case. In the event that an inheritance was provided to one party, it does not automatically fall into a protected category which prevents the inheritance from forming part of the property pool. Rather, on consideration of a number of factors, a Court will determine whether it is just and equitable for an adjustment to the parties. 

When the inheritance was received

If an inheritance is received by a partner before the start of the relationship or around the time the relationship formed, it will likely be considered an initial contribution to the relationship by that party. This means that the value of the inheritance will not be separated from the asset pool of the relationship. However, the inheritance will be treated as one of the contributions made by that party and therefore will be taken into account when determining that party’s entitlements. Depending on how large the inheritance was and the size of the party’s other financial contributions to the relationship, the inheritance may have a large or a small adjusting impact on the party’s entitlements at the property settlement.

If an inheritance is received during the course of a relationship, how it is treated will depend on how the money was used by the couple and on the intentions of the benefactor. If the money was spent on improving the family home, paying for the family’s day to day expenses and generally used for the benefit of both parties, it will be treated as a financial contribution to the relationship by the party who received the money.

If an inheritance is received late in a relationship or after separation occurred, it will still need to be included as an asset in the property pool, but the parties’ current and future circumstances will impact how Court will determine the funds shall be distributed. 

How the Court view inheritances

The Court has discretion to determine how an inheritance should be considered in a property settlement. The current legislation regarding property settlements provides the Court with power to identify the legal and equitable rights and interests the parties have in relation to an inheritance and taking into consideration the parties’ contributions and current and future circumstances, will make an order as to how the inheritance is to be dealt with. 

Going to court for a property settlement

All persons with family law disputes are encouraged to resolve their situation without seeking the intervention of the court. This can be done by negotiating with each other directly, with the assistance of lawyers or by attending Family Dispute Resolution. If a family law dispute cannot be resolved without litigation, a party can file an application for orders in the Federal Circuit and Family Court (FCFCA). An application must be filed within 12 months of a divorce becoming final. For parties who are separating from de facto relationships, applications must be filed within two years of the date of final separation.

If you require legal advice or assistance with a family law matter please contact Armstrong Legal.