How Inheritances are Factored into a Property Settlement

When a relationship ends, most couples will need to do a property settlement.  If one party received an inheritance during the relationship there might need to be some consideration as to how that is factored into the property settlement.

Inheritances are gifts that a person receives upon the death of a loved one.  They can be monetary or physical assets.  In general, inheritances received before, during, or in some cases after, a relationship are treated as contributions to the relationship made by or on behalf of the person receiving them. How the inheritance is treated in the property settlement will depend on a number of factors.

Firstly, the timing of the inheritance is important.  An inheritance received very early into a 20 year relationship will generally have less weight than an inheritance received in, say, the last 5 years of the relationship.  If the relationship was short, the inheritance will be a significant consideration.  If the inheritance was received prior to the relationship, and still existed when the parties commenced their relationship, then it will be considered as an initial contribution.  Further, an inheritance received post separation might have considerations to both the contributions of a relationship and the future needs of the party.

Secondly, the amount of the inheritance will need to be ascertained.  If the inheritance was only of a modest amount, it may not have a significant impact on the property settlement.  The amount of the inheritance also needs to be weighed up against the other assets, debts and contributions of the relationship.

Thirdly, how the inheritance was applied will also be a factor for consideration.  For example, if the inheritance was applied towards the deposit on a home or to purchase a car, caravan, or family travel, then it can be a significant contribution of the party who received it.  This is because it was applied to the benefit of the relationship.  If the other party also contributed to the asset acquired with the inheritance, this will also be a consideration.

Finally, the relationship with the testator will also be a consideration.  For example, if the inheritance was bequeathed to one party, but the other party had a significant role in caring for that person prior to their death, this may be relevant to the property settlement and weight given to the inheritance.

Sometimes there is a situation where a person is expected to receive a large inheritance, but it hasn’t yet happened at the time of separation.  This may be because the person has not passed away, or an estate distribution has not been finalised.  In these situations, the inheritance may be treated as a financial resource of the person who will receive it, rather than an asset to be included in the property pool.  Financial resources are also relevant to a property settlement.

If the expected inheritance is coming from a person who has not passed away at the time of separation, there must be real evidence that it is likely to occur in the near future for it to be relevant to the property settlement.

There is no one answer as to how an inheritance will be factored into a property settlement.  As can be seen, it will depend on the specific facts and circumstances of each case, and it can be complex.  Disclosure of the inheritance will be required as part of the property settlement process and appropriate legal advice will be required to ascertain the impact the inheritance may have on a property settlement.

If you have a family law matter that involves an inheritance and require advice, we have accredited specialists and experienced solicitors who can assist you.

Simply contact our friendly staff and book your fixed fee initial consultation for $220 or complete our online enquiry form and someone from our office will contact you.