How the Family Court deals with assets received from an inheritance
There are a number of steps considered by the Court in determining the issue of the division of property between separating or divorcing parties. Firstly, the Court considers all of the assets, liabilities and superannuation that comprises the “property pool” of the marriage or de-facto relationship. All of the property owned by the parties is included in the property pool in the first instance, no matter whether it is owned by one or both of the parties and whether it was acquired before, during or after the relationship.
Clients can be surprised to learn that assets received by way of an inheritance are not automatically immune from a property division and are also included in the pool of assets, in the first instance. However, there are a number of factors the Court can consider when contemplating how assets received by way of an inheritance should be treated, when considering the parties’ respective contributions to the property pool.
Bonnici and Bonnici (1992) FLC 92-272 involved two parties who began living together in 1969, were married in 1973 and separated in 1990 (a relationship of approximately twenty-one (21) years). The husband received two inheritances late in the marriage: a sum of $20,000.00 in 1987 (approximately three years prior to the end of the relationship) and an inheritance which the husband submitted was valued to the sum of “at least $250,000.00” within a year of separation. The Court held:
“A party could not be regarded as contributing significantly to an inheritance received very late in a relationship, and certainly not after it had terminated, except in very unusual circumstances” (emphasis added).
The Court decided that those unusual circumstances did not exist in this case, finding there were ample funds available by way of other assets in the property pool to achieve a just result and noting:
“If, for example, in the present case, there had been no other assets than the husband’s inheritance, but the wife had, as his Honour found, clearly carried the main financial burden in the support of a family and also performed a more substantial role as a home-maker and parent than the husband, then it would clearly be open and indeed incumbent upon a Court to make a property settlement in her favour from such an inheritance”.
In Schirmer and Sharpe  FamCA 40; (2005) FLC 93-213, the husband and wife had married in 1987, separated in 1996 and had four children. During the relationship the parties lived in a home owned by the wife’s parents and had nominal assets at the conclusion of the relationship. Three years after separation, the wife received two properties by way of an inheritance. The husband filed an application seeking property division after the wife received the inheritance.
The trial judge decided that the wife had made 90% of the contributions to the property pool and the husband had made 10%, then in the exercise of his judicial discretion, he made a further adjustment of 2.5% to the husband.
The husband appealed the decision, seeking an assessment of his contributions at 30%. On appeal, the Full Court found that the 10% adjustment made to the husband was within range of just and equitable oucomes and the appeal was dismissed.
In Sinclair & Sinclair  FamCA 388 the length of the relationship was disputed. The wife’s view was that it lasted eleven years and the husband’s view was that the relationship continued for twenty-six or twenty-seven years. The property pool was valued at around $7,000,000.00, most of which the wife had received early in the marriage. His Honour found that three quarters of the property pool was unrelated to contributions made by the parties, given that they were made by the wife’s father. His Honour found that the parties contributed equally to the remaining 25% of the pool and made orders which had the effect of distributing 12.5% to the husband.
James & James (1978) FLC 90-487 provides an example of circumstances in which a Court may find that the party who was not a direct recipient of an inheritance is nonetheless found to have make contributions to that inheritance. In this matter, the husband and wife worked on the husband’s parents farming property for 13 years, the husband having the expectation that the land would eventually become his. The husband inherited one half of his father’s estate, including the property in which the parties had resided, after the parties separated but prior to the formal division of matrimonial assets. It was argued on behalf of the wife that it was in the context of the expectation that the husband would eventually own that property that she made indirect contributions to the conservation and improvement of the property and made other contributions as a wife and mother.
Will the Court consider a future inheritance?
A future inheritance generally does not form part of the asset pool. His Honour holding in Kavan & Mallery  FCCA 210 said:
“A will is a mere expression of intention at the time it was made which may be freely revoked or altered and has no legal effect until the death of the testator.”
However, the expectation of an inheritance might be considered by the Court if the facts and circumstances are such that they would lead the Court to anticipate that the inheritance will be received imminently or that is otherwise a financial resource to be taken into account in the divorce settlement. Pursuant to section 79(5) of the Family Law Act, the Court can adjourn proceedings if “there is likely to be a significant change in the financial circumstances of the parties to the marriage or either of them”.
The issue of whether assets received from an inheritance ought to be treated differently from other property in the property pool depends on the facts and circumstances of each case.
Relevant considerations include:
- the time at which the inheritance was received;
- the value of the inheritance when it is compared to the overall value of the property pool; and
- whether the inheritance may have been intended as a gift to both of the parties.
The lawyers at Carr & Co Divorce & Family Lawyers can advise you in relation to how an inheritance might be treated in your family law matter, with reference to your particular circumstances. Contact us to arrange an appointment.