Inheritances – In or Out?

The issue of a prospective inheritance or an actual inheritance often comes up in discussions with clients regarding their property settlement issues.

Understandably clients are concerned about money they will receive after separation being available for division between them and their former spouse.

This issue was most recently considered by the Federal Circuit Court of Australia in a judgment delivered on 8 December, 2016.

In the matter of Gilmartin & Gilmartin [2016] FCCA 3135 the Court held that it was appropriate for a Court to make property adjustment Orders in circumstances whereby the only asset available for distribution was an inheritance due to be received by the Husband post separation. The inheritance comprised the Husband’s share in the net proceeds of sale of his Mother’s home.

The Court quoted the authority of Bonnici v Bonnici (1992) FLC 92-272 and relied upon the Full Court’s statement as follows:-

A property does not fall into a protected category merely because it is an inheritance. On the other hand, if there are ample funds from which an appropriate property settlement can be made and a just result arrived at, then the fact of a recently acquired inheritance would normally be treated as an entitlement of the party in question…. The other party cannot be regarded as contributing significantly to an inheritance received very late in the relationship and certainly not after it has terminated, except in very unusual circumstances.

The Wife asserted that because there was no other asset available for division and despite the parties having earlier informally divided their assets, that it would be just and equitable to divide the monies to be received by the Husband.

The Husband asserted that the Court ought to find that it was not just and equitable to make an Order dividing up the inheritance and find that the informal property settlement be upheld.

The Court found in favour of the Wife’s position and found that “very unusual circumstances” existed in the matter, taking into account particularly:-

  1. The absence of any other significant asset;
  2. The Wife’s contribution as primary homemaker and caregiver during the relationship;
  3. The use of the proceeds of sale of the former matrimonial home to partially repay a debt of the Husband’s family which protected the asset which the Husband thereafter inherited; and
  4. The Wife being a beneficiary in the Mother’s Will until 2012.

Therefore the answer to the question as to whether an inheritance is in or out is – maybe. As with any property settlement matters, the outcome is determined on a case by case basis after a consideration of all relevant factual matters.

Assets such as prospective or actual inheritances can be protected by way of a Binding Financial Agreement so as to avoid litigation such as this matter. Expert legal advice is of utmost importance upon separation and the Family Law team at Marino Law can give you clear, concise and no nonsense advice without delay. Contact us now for an appointment with our Accredited Specialist in Family Law.