An inheritance refers to a gift, devise or bequest of property which a person may receive under the Will of a person who has died. A party may also be eligible to receive a distribution from the Estate of a person who dies intestate. Examples of property include, money, digital assets and other personal effects of belongings.
Things to consider
In family law proceedings, an inheritance that one party has or is likely to receive is an important consideration, particularly where the inheritance is of significant value.
The treatment of inheritance can vary depending upon the contributions made by each party and their respective future needs.
Ultimately, the treatment of an inheritance (or an expectant inheritance) will be determined by the Court on a case-by-case basis. How the inheritance is treated will vary and, practically speaking, may depend upon:
- When the inheritance was received. Was it received during the marriage/relationship or post-separation? If during the marriage/relationship, what was the length of the marriage/relationship? Was the inheritance received at the beginning or closer to separation?
- How a party has used or applied their inheritance towards matrimonial property (or not).
- What contributions each party had made (financial or non-financial) to the person from whom the inheritance was received, and, whether the inheritance is taken to be financial contribution by either party to the matrimonial asset pool more generally.
- How the Balance Sheet should be constructed having regard to the above. A common question asked by clients in family law matters where an inheritance is in issue is “is my inheritance excluded from or included in the asset pool?”
- Whether it has been received? Or expected to be received? This is an important distinction.
What does the Court have to say?
In the case of Bonnici & Bonnici (1992) FLC 92-272, the Full Court of the Family Court confirmed that an inheritance is not shielded from a family law property settlement, and the treatment of inheritance is reliant on the individual circumstances of each case.
In the case of Miller & Miller [2014] FamCA 591, the Husband received a significant inheritance 3 years before the end of a 10-year marriage. The inheritance received represented a significant percentage of the overall asset pool available for division. Given the circumstances, the Full Court considered that it was appropriate for the Husband’s inheritance to be included in the overall pool of assets, and the Husband received a generous assessment on contributions.
Conversely, the case of Holland & Holland [2017] FamCAFC 166 concerned an appeal by the Wife against a property order made in respect of the parties. In 2011, the Husband received an inheritance from his later brother’s Estate to the value of $715,000. At first instance, the Husband’s inheritance was excluded from the asset pool and treated as a mere financial resource of the Husband. On Appeal, the Wife asserted that the inheritance of the Husband should be included in the asset pool of the parties and thus should be divided accordingly. The Full Court allowed the appeal, noting that the trial Judge’s decision to deem the inheritance as a financial resource of the Husband alone was incorrect, and affirming that any property, legal or equitable in nature, should be included in the asset pool of the parties. This case serves as a stark reminder of the importance to finalise all property matters as soon as practicable once the marriage has irretrievably broken down.
The recent case of Roverati & Roverati (2021) FLC 94-027 [2021] FamCAFC 89 provides useful insight into the treatment of inheritance by the Family Court. In this case, the parties were married for 33 years and both received respective inheritances throughout the marriage. The Wife’s inheritance was valued at approximately $50,000, compared to the Husbands inheritance valued at over $400,000 at the time it was received. The husband derived income from the inheritance property over time, which he used to reinvest, and for the household expenses of the parties.
The primary Judge assessed the parties’ contributions as equal. The Husband challenged the primary Judge’s treatment of the inheritances, asserting that the primary Judge had failed to consider and give weight to the inheritance received by the Husband (and thus his contribution) and the extent to which this inheritance was put to the benefit of the household. The appeal was allowed, and the Court reassessed the contributions at 55/45 in the Husbands favour.
In some circumstances, it may be more appropriate for the Court to include the inheritance in the one pool of assets or a two-pool approach. It cannot, however, be excluded.
Key lessons
The receipt of an inheritance is a complex issue that requires consideration in many family law matters. As demonstrated above, the Court will examine the issue of inheritance on a case-by-case basis and therefore it is essential that a party obtains advice early on in their matter.
If you require any advice or assistance with respect to an inheritance in your family law matter, please be in contact with our family law team who will be more than happy to assist you.
