Separation is an emotional time for any family. Emotions can, however, be heightened, if one of the spouses has recently received an inheritance.
When grief is added to the mix, together with a sometimes understandable wish of the spouse whose friend or family member has passed away to protect the family wealth from a claim from the other spouse.
What Happens To An Inheritance During Divorce Settlement
So what does the law say about inheritances in family law matters? There are many reported cases dealing with inheritances.
No doubt that is because it is emotionally hard for spouses to agree to ‘give up’ this wealth. It is also because all families’ circumstances are different and there is no ‘one size fits all’ rule for distributing inheritances between spouses.
Timing is Relevant
The timing of the inheritance can be important.
If an inheritance is received very early in what becomes a long relationship, it will be one of the myriad of contributions made by both parties which must be assessed – the inheritance may have had obvious impact, but, over a long period, spouses may have contributed in a number of significant other ways since its receipt.
In these circumstances, it is more likely that the inheritance will form part of the asset pool to be distributed between the parties, with the recipient receiving ‘credit’ for having increased the value of the asset pool by receiving the inheritance. The extent of the credit, if any, will depend on the amount of the inheritance, balanced against considerations such as the value of the remaining asset pool and the use to which the inheritance was put.
If the inheritance is received very late in the relationship or after separation, the Court still has the power to include the inheritance in the asset pool. It can also treat the inheritance as if it is in a separate asset pool and divide it in a different way to the remaining assets, an approach which may leave it in the hands of the recipient.
If the latter option is adopted, then the spouse who did not receive the inheritance is likely to receive more of the remaining asset pool to recognise that the other spouse will have the benefit of the inheritance into the future.
The Intention of the Deceased Person is Relevant
Most often, the person who has passed away leaves the inheritance specifically to the recipient spouse. In those cases, the recipient is the spouse who will receive credit in the settlement for bringing the inheritance ‘to the table’.
However, if the deceased person makes it clear by the terms of his or her Will that the intention is that both spouses would benefit from the bequest, that intention is a relevant factor and it can mean that the inheritance is not treated as a contribution by the related spouse alone.
Contributions by the Unrelated Spouse can also be Relevant
Every case has unique aspects, and cases are sometimes seen where the spouse who is unrelated to the person who left the bequest made contributions to the receipt of that inheritance.
That can come in many forms – providing gratuitous care when it was needed, and completing maintenance, repairs and renovations to a house, or labour into running a business, for the benefit of the deceased.
These contributions can mean that a finding is open to a Judge that both spouses have contributed (equally, or otherwise) to that inheritance having been received.
Can I Protect My Future Inheritance?
There is an option available if it is important for one or both spouses to protect a future inheritance from a claim by the other if the relationship ends.
A Financial Agreement can ‘quarantine’ inheritances and provide that if the spouses separate, any inheritance or inheritances will remain the property of the spouse who received it.
The Agreement can also deal with how other assets, including superannuation, will be dealt with if there is a separation or it can deal only with the inheritance, leaving the spouses to agree (which is not always possible!) how the balance of their wealth will be distributed between them.
Ultimately, the treatment of inheritances involves a very lawyerly answer – it depends.
Need Advice on Inheritance for your Divorce Settlement?
BGM Family Lawyers are expert Gold Coast divorce lawyers who are highly experienced with property settlements.
We can help with an examination of the situation in your particular case, and advise you if you have any questions about the impact of an inheritance on a family law matter.
Contact us online or phone us today on 1300 246 529 for an appointment.
