Separating from your partner is a difficult process and often brings uncertainty, especially when it comes to resolving financial matters. One common question that we are commonly asked is: “What happens if I get an inheritance after separation?”
Whilst it is commonly assumed that if your name alone is a beneficiary to a will or inheritance, you are entitled to that estate in its entirety. However, this is not always the case. The Federal Circuit and Family Court of Australia has a wide discretion to consider whether inheritance forms part of a family law separation.
In Bonnici (1992) the Courts established that where parties are entitled to financial assets such as inheritances, the parties must have a clear interest in the property, and that this is dependent on the facts of the case. In addition to this, the case also found that the other party cannot be regarded as having contributed significantly to an inheritance received very late in the relationship, except in very unusual circumstances.
In Norbis v Norbis [1986], it was established that the Court has discretion at large to produce a result that is just and equitable and can adopt either a global approach or an asset-by-asset approach.
In Victor v Victor [2011] this case established that the post-separation inheritance was not included in the property pool available for division. When examining the facts of this matter, the wife inherited $700,000 as sole beneficiary of her neighbour’s estate, to which they regarded her as their own daughter. The wife had contributed significantly to the lives of her neighbours, and the husband had not. The Court considered that the inheritance was an asset (more accurately a series of assets) that came into the wife’s possession after separation and to which the husband had made no effective contribution. In these circumstances, these assets should be excluded from the pool. Whilst this may seem significant, the Court regarded the wife retaining all of the inheritance as just and equitable, as the husband was sole provider and financial earner, and the wife was a home maker.
Similarly in Lombard [2011], it was found that the husband should retain the inheritance received from his late mother’s estate, and that it should not be included in the matrimonial assets. The wife argued that she assisted with the Husbands late mother’s care and as a result should share in the inheritance he received from his mother. The Court found that the Wife did not contribute to the Husband’s inheritance payment and therefore the husband should retain the inheritance received from his late mother’s estate.
Although these cases above may seem to set the standard that if you are named solely as beneficiary, you will retain the inheritance in its entirety, this is not always the truth.
In Ross v Audley [2011], the matrimonial pool was over $3 million, with 97% received by way of inheritance from the wife’s mother’s estate. The wife was a home carer, and the husband was employed. Whilst the wife attended to her mother during the day, the husband attended each evening to feed and settle her for the night. The Court found that the inheritance was received in the second half of the marriage and not very late in the relationship, as it was 4 years prior to separation. The Court found that the Husband was entitled to 25% of the matrimonial assets which included the inheritance from the wife’s mother.
Every case will turn on its own facts and circumstances and it is important to understand the key factors that might weigh in the assessment of contributions before the Federal Circuit and Family Court of Australia. If you are separated and have received an inheritance or you are about to receive an inheritance, you should obtain legal advice.
If you are seeking legal advice, contact Michael Conley Lawyers who have decades of experience in family law and are a dedicated family law firm – contact us today on (02) 9223 5299 or email lawyers@michaelconley.com.au to book a consultation.
This Blog was written by Lilliana Fante, Senior Associate.