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02
SEP
2018

Inheritances

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What are your rights?

During a married or de facto relationship, parties may at some stage, receive the benefit of an inheritance. In many cases, this can be a significant financial benefit to the parties. So what happens when the relationship ends?

Parties to a property settlement often have misconceptions about how an inheritance should be distributed after separation. Many believe they should be treated separately and not fall into the asset pool of the parties. Previous cases have determined that timing of receipt of the inheritance often plays a large part in entitlement and distribution.

Inheritances received PRIOR to the commencement of the relationship.

If received at the commencement of the relationship or prior, it will be treated as an initial contribution by the party receiving the inheritance. It’s not separated from the asset pool at the end and given back to the original party in addition to the entitlements to the balance of the asset pool. It will however, be taken into account, and may warrant an adjustment of assets in favour of the party who received the inheritance. However, in some cases the inheritance can be diminished by subsequent contributions during the relationship. This is especially the case in a long relationship where some inheritances may ultimately have very little impact on a party’s final entitlements. It may be that no adjustment is warranted.

DURING the relationship

If an inheritance is received during the relationship and is applied towards the improvement or purchase of a former matrimonial home, it is usually classified as a financial contribution to the joint asset pool by the receiving party.

 

LATE in the relationship or after separation

Where an inheritance is received late or after separation, the court might deal with it separately from other assets. Two asset pools may be created and split at different percentages. For example, the pool containing the inheritance may be determined to be a 100% contribution by the person receiving the inheritance. The contributor to the second pool of assets containing all other assets, might be determined in a different percentage.

 

In the case of Bonnici the court determined the major deciding factor was the timing of receipt of the inheritance, and the impact it would have on the size and distribution of the asset pool.

 

In this case the inheritance was received late by the husband and the parties had no other assets available for distribution other than the inheritance.  The court however, was satisfied the wife had made the greater contribution as parent and homemaker and therefore, it would be just and equitable for her to receive an adjustment for those contributions from the inheritance of the husband. Had the asset pool in this case been larger, with significant funds available for distribution to the wife from the assets, then a recently acquired inheritance would more than likely be treated as an entitlement of the husband.

 

Of course, every case is determined on their own merits and decisions and exceptions are usually made on a case by case basis. In the case of Heath, a wife’s “efforts” towards the care of the spouse’s elderly parents were deemed contributions towards the husband’s inheritance. In De Angelis improvements made by the husband to the maintenance and improvement of properties held by the wife’s mother and aunt, were deemed part of the inheritance and treated as a contribution under Section 79 of theFamily Law Act.

 

An inheritance bequeathed after separation, however not yet received, may still be classified as a financial resource of that party.  This is because the funds are not yet available for distribution but their arrival for the benefit of the receiving party is imminent and therefore that party will have the benefit of using those funds to meet the costs of their future needs, whereas the non-receiving party does not.   The value of this benefit can often be determined and included when considering each party’s entitlements to the division of the asset pool available and may increase the non-receiving party’s entitlements.

Sharon Payne Family Lawyers specialise in all areas of family law, including de facto relationships, same-sex relationships, inheritances, property, parenting and divorce. Should you have any inquiries, or would like further advice, please do not hesitate to contact a member of our team on Ph: 8626 2670 who will be more than happy to assist.