The division of inheritance during divorce settlements is a volatile process. Here are some things you should keep in mind.
What is Inheritance?
An inheritance is the practice of passing on a gift of property upon the death of an individual. This can occur either through the Will of the person who has passed away, and if a person has died intestate (not having made a will before their death), then courts will distribute the property pursuant to the succession laws.
Factors to Consider Regarding Inheritance and Divorce
There are many factors to consider when dividing inheritance during a divorce, and this is almost always circumstantial and determined on a case-by-case basis. These factors are set out below.
- When was the Inheritance Received?
If the inheritance was received by one party around the commencement of the relationship, it is most likely to be seen as a financial contribution to the relationship and will be included in the divorce asset pool.
If the inheritance was received during the relationship, its division will predominantly be based on how the monies was used in the relationship, as well as what the intentions of the benefactor were.
If the inheritance was received after the date of separation, in most cases it will not be viewed as a financial contribution to the asset pool. However as stated above, through judicial discretion, courts can divert from the traditional approaches to inheritance based “upon the circumstances of individual cases” (Miller & Miller [2014] FamCA 591). In this case, the husband received a significantly large inheritance 3 years prior to the end of a 10-year marriage, where parties had two young children. The Full Court found that it was appropriate for the inheritance to be included in the pool of assets while still giving the husband a generous assessment on contributions. This is because the wife had carried the main financial burden in family and she played a more substantial role as a homemaker and parent than the husband.
- What were the Intentions of the Benefactor?
The intentions of the benefactor are another factor that must be considered. The court will have discretion to determine the evidence that support the benefactor’s intentions; whether that be the inheritance should benefit the whole family (and will be a part of the asset pool) or whether it is only to benefit the named beneficiary (and kept separated from the asset pool if the beneficiary keeps it separate from other joint assets).
- What is the Size of the Asset Pool?
The size of the asset pool in comparison to the size of the inheritance can significantly influence how inheritance will be distributed in a divorce settlement. Specifically, if the size of the asset pool is smaller than the inheritance, a late inheritance may be included for distribution.
Legal Advice
The distribution of inheritance in divorce settlements in Australia is a complex process and many factors need to be considered.
If you are attempting to resolve issues regarding inheritance and divorce and are looking for assistance, please do not hesitate to contact our offices on 8917 8700.