Inher­i­tances in Fam­i­ly Law

Say you have recent­ly sep­a­rat­ed and no prop­er­ty or finan­cial set­tle­ment has yet been finalised. You have a very elder­ly great aunt who is wealthy and to whom you have always been close. Your for­mer de fac­to part­ner or spouse now wants you and/​or your great aunt to pro­duce the Will. Your first reac­tion is out­rage. How­ev­er, sim­i­lar sce­nar­ios are not entire­ly uncom­mon in the Fam­i­ly Law Courts. How prospec­tive inher­i­tances and inher­i­tances that have been received are treat­ed when assess­ing prop­er­ty set­tle­ment enti­tle­ments depends on the cir­cum­stances of the Case.

  1. Has the inher­i­tance been received?

A prospec­tive inher­i­tance is not con­sid­ered to be prop­er­ty nor nec­es­sar­i­ly a finan­cial resource[1]. While it is not usu­al­ly tak­en into account in the divi­sion of assets, as the tes­ta­tor will change his/​her Will before dying, this is not an absolute rule. There have been cas­es in which prospec­tive inher­i­tances have had an impact on the final divi­sion of assets through the oper­a­tion of sec­tion 75(2)(o)[2] of the Fam­i­ly Law Act 1975 (‘the Act’). 

The Court in the case of Tul­loch & White stated:

in a case where the tes­ta­tor had already made a Will favourable to the par­ty but no longer had tes­ta­men­tary capac­i­ty and there was evi­dence of his or her like­ly impend­ing death in cir­cum­stances where there may be a sig­nif­i­cant estate, and where there was a con­nec­tion to s 75(2) fac­tors, it would be shut­ting one’s eyes to treat that as irrel­e­vant”[3].

Alter­na­tive­ly, cas­es have been adjourned in sit­u­a­tions where there is like­ly to be a sig­nif­i­cant change in the finan­cial cir­cum­stances of either of the parties.

It is impor­tant for par­ties to assess their respec­tive finan­cial sit­u­a­tions and obtain advice as to the poten­tial impact of inher­i­tance on them.

If the inher­i­tance has already been received, it is includ­ed as prop­er­ty of the par­ties. How­ev­er, the treat­ment of such an inher­i­tance may vary.

  1. When was the inher­i­tance received dur­ing the rela­tion­ship / marriage?

An inher­i­tance is pre­sumed to be a con­tri­bu­tion on behalf of the per­son inher­it­ing it unless there is evi­dence to the con­trary[4].

The ear­li­er an inher­i­tance is received in the mar­riage or rela­tion­ship, the less like­ly it is that there will be an adjust­ment in that par­ty’s favour at the time of set­tle­ment. While it is pos­si­ble that if the inher­i­tance is sig­nif­i­cant that there will be some adjust­ment in favour of the receiv­ing par­ty on a con­tri­bu­tions basis, the con­tri­bu­tions made over time by each par­ty need to be tak­en into account and the inher­i­tance con­tri­bu­tion may be said to have been erod­ed” over time.

Par­ties also need to con­sid­er if a spring­board” argu­ment can be made, that is, if the inher­i­tance has led to future wealth, such a con­tri­bu­tion may be less like­ly to be erod­ed[5].

  1. Was the inher­i­tance received after separation?

If an inher­i­tance has been received very late in the rela­tion­ship or after sep­a­ra­tion, except in unusu­al cir­cum­stances, it may be exclud­ed from the claim[6].

How­ev­er, this does not mean that par­ties can refuse to dis­close or dis­re­gard such inher­i­tances. Full and frank dis­clo­sure still needs to be made by each par­ty and the inher­i­tance needs to be considered.

If the inher­i­tance is exclud­ed, adjust­ments can be made to the divi­sion of assets when tak­ing into account fac­tors con­tained in sec­tion 75(2) FLA, but com­mon­ly in cas­es where late inher­i­tance has been received by one par­ty, any adjust­ment for sec­tion 75(2) fac­tors has been modest. 

  1. In what form is the inheritance?

A par­ty who has applied cash inher­i­tances to the gen­er­al needs of the fam­i­ly may have a dif­fer­ent argu­ment to a par­ty who received an inher­i­tance in the form of real estate, expend­ed no mon­ey on it, and still owns the same real estate at the time of sep­a­ra­tion and at the time of trial.

The Court in the mat­ter of Lee Steere stated:

the rel­e­vance of the inher­i­tance or gift to one par­ty dur­ing the mar­riage may depend upon the use to which that prop­er­ty is put by the par­ties.”[7]

It is poten­tial­ly more pos­si­ble that an asset which is still in exis­tence in its orig­i­nal form and to which no con­tri­bu­tions have been made will be quar­an­tined from the pool.

  1. How big is the non-inher­i­tance asset pool?

If the non-inher­i­tance pool is much less that the inher­i­tance received, and it would there­fore result in an unjust or inequitable divi­sion, the Court may use the inher­i­tance to adjust for it[8]. The Court in the case of Bon­ni­ci stated:

if…there had been no oth­er assets than the hus­band’s inher­i­tance, but the wife had…clearly car­ried the main finan­cial bur­den in the sup­port of a fam­i­ly and also per­formed a more sub­stan­tial role as a home­mak­er and parent…then it would clear­ly be open and indeed incum­bent upon a Court to make a prop­er­ty set­tle­ment in her favour from such an inheritance.”

This ties in with the issue of ongo­ing post sep­a­ra­tion con­tri­bu­tions made by a par­ty which will be dealt with in a fur­ther article.

  1. Who actu­al­ly received the inheritance?

Although an inher­i­tance received by one per­son is gen­er­al­ly con­sid­ered to be the con­tri­bu­tion of that per­son, there are some cas­es in which the Court con­sid­ers it to be a con­tri­bu­tion made by both par­ties. The non-receiv­ing par­ty has to bring evi­dence to show how they have made con­tri­bu­tions toward the receipt of the inheritance. 

For exam­ple, if the non-receiv­ing par­ty has assist­ed in a sig­nif­i­cant way to care for the receiv­ing par­ty’s relative/​friend leav­ing the inher­i­tance[9], or if the non-receiv­ing par­ty had made improve­ments to real estate the sub­ject of the inher­i­tance with­out receiv­ing any ben­e­fit[10], there may be an argu­ment that can be made that the inher­i­tance was also a con­tri­bu­tion on that per­son­’s behalf. 

There needs to be a clear nexus between the con­tri­bu­tion and the prop­er­ty which would oth­er­wise be treat­ed as a sole con­tri­bu­tion and it goes with­out say­ing that the acts need to be sig­nif­i­cant. Vis­it­ing the tes­ta­tor 6 times in hos­pi­tal (amongst oth­er things) has not been con­sid­ered to be sig­nif­i­cant[11].

The issue of inher­i­tances can be com­plex and if you or your ex for­mer fac­to part­ner or spouse are about to become or are the recip­i­ent of an inher­i­tance we rec­om­mend you seek legal advice.

[1] Tul­loch & White (1995) 92 – 640 – a finan­cial resource con­notes some degree of enti­tle­ment to, con­trol over, or rel­a­tive cer­tain­ty of receipt of property’

[2] See for exam­ple In the Mar­riage of De Ange­lis [1999] Fam­CA 1609

[3] Tul­loch & White (1995) 92 – 640

[4] See Kessey and Kessey (1994) FLC 92 – 495

[5] See Under­wood (1981) FLC 91 – 020

[6] See Bon­ni­ci (1991) FLC 92 – 272

[7] See Lee Steere (1985) FLC 91 – 262

[8] See Bon­ni­ci (1991) FLC 92 – 272

[9] See James and James (1978) FLC 90 – 487

[10] In the Mar­riage of De Ange­lis [1999] Fam­CA 1609

[11] See for exam­ple Nikas & Anthis [2015] FCCA 1871