During a marriage or a de facto relationship, it is not uncommon for one party to receive an inheritance from one or both of their deceased parents. An inheritance received during a marriage or a de facto relationship is deemed to be property under the Family Law Act 1975. Accordingly, such an inheritance may be included in the pool of assets available for distribution between the parties by way of final property settlement.
The Court will consider the quantum of the inheritance as a contribution of the party who received it, particularly in circumstances where the inheritance has been applied towards the acquisition of assets that comprise the property pool. The percentage attributed by the Court to such contributions requires an assessment of the total asset pool and the contributions made by each party to the acquisition, improvement and conservation of the assets.
Inheritances received by a party after separation may still be included in the property pool. The Court will consider such post separation contributions in favour of the party who received the inheritance. In other cases, the Court may exclude a party’s inheritance prior to or post separation, particularly in circumstances where the inheritance is not mingled with any joint assets or the assets of the other party and kept separately in this regard.
If the estate of a party’s parent is yet to be administered and they are a beneficiary under the Will, their interest in the estate is regarded as property under the Family Law Act 1975. However, if the other party’s parent is not yet deceased, the mere fact that a party is a potential beneficiary under the Will is not sufficient to fall within the definition of property under the Act. This is because a potential beneficiary under a Will does not have an enforceable right to stop the testator from altering their Will at some time in the future.
If a party to a marriage or a de facto relationship has an expectation of a significant inheritance, the other party may wish to argue that such future inheritance should be relevant in proceedings for final property settlement. The grounds upon which it could be argued that an expectation of an inheritance is relevant are as follows:
- The Court is required to consider the financial resources of each of the parties;
- The Court must consider any fact or circumstance which, in the opinion of the Court, the justice of the case requires to be taken into account; and
- The Court may adjourn property proceedings if there is likely to be a significant change in the financial circumstances of the parties to the marriage or a de facto relationship or either of them.
The ultimate criterion is whether the evidence in a particular case is or might be relevant to the Court making a determination as to whether an outcome is just and equitable in the circumstances. An expectancy of an inheritance will not be deemed relevant in many property proceedings. Relevance ultimately depends upon the nature of the claims being put forward and the facts of the particular case. There is no absolute rule that provides for an expectation of an inheritance to be included as relevant or to be otherwise excluded in property proceedings under the Family Law Act.
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