When a marriage or a de facto relationship ends, marital assets become part of an asset pool to be divided. If you have received an inheritance over the course of your marriage, you may be concerned about whether you will get to keep the money left to you or whether the inheritance will become part of the pool of marital property that your spouse receives a part of. While the answer to this question can depend upon many factors, including the length of the marriage, the amount of the inheritance, and other available assets, the fact is an inheritance is usually going to become a part of the pool of assets that is subject to division under section 79 of the Family Law Act.
Owen Hodge Lawyers can provide guidance with the estate planning process if you wish to explore options for leaving your loved one assets and protecting your money or property from becoming a part of a potential future asset pool in divorce. We can also provide guidance to couples who are going through the dissolution process, and can help you as your marriage or de facto relationship ends. We have represented many individuals in arguing for a fair division of marital assets, including inheritances. Give us a call today to learn more.
What Happens to an Inheritance When a Relationship Breaks Down?
When a court is asked to determine how property should be divided after the end of a marriage or a de facto relationship, the court determines the total pool of assets to divide and then determines a fair division of money and property. Many different things are factored in when the court divides marital assets, including employment earnings contributed by each party, gifts and inheritances received by each partner, future support requirements of each partner, ability of each partner to earn income, and child care responsibilities of each partner.
As a general matter, an inheritance received during the course of a marriage is usually going to become a part of the asset pool. There is no special protection applied by law to inheritances that result in their exclusion.
The inheritance may be considered a contribution to the asset pool from the spouse who was given the inheritance, especially if it was received late in the relationship or if it was received only a short time before the end of the marriage or de facto union. Because the contributions made by each spouse are a key factor used to determine property division, someone with a large inheritance may sometimes be viewed as having made a substantial contribution- thus entitling that spouse or partner to a larger share of the asset pool. However, in Figgins and Figgins (2002) the court rejected the idea that the receipt of inheritance should be characterized as a special skill that should be considered a contribution by the receiving spouse. When the court does not consider the inheritance a contribution, no adjustment of property division is made based on the inclusion of inherited funds in the asset pool.
Whether an inheritance is considered a contribution or not can make a big impact on the overall division of assets. However, there are many other considerations that go beyond just determining if the inheriting spouse gets credit for contributing the funds and property.
In some cases, for example, a non-inheriting spouse will take steps to improve the value of the inherited asset. For example, if a wife is left a house, but a husband fixes up that family home, the husband may have materially increased the value of the property. The husband’s efforts can be considered a contribution and would be taken into account under Section 79(4) of the Family Law Act.
The availability of other resources also matters. When there are significant assets available separate from the inheritance, the court may also consider this factor in determining what an appropriate property settlement is. In Bonnici and Bonnici (1992), for example, a husband had received a $270,000 inheritance three years prior to the relationship breakdown and there were $600,000 in total marital assets separate from the inheritance. The court indicated that if the wife had made substantial contributions in the form of income and homemaking and there were few other assets, it would be “incumbent” upon the court to make a property settlement in favour of the wife using funds from the husband’s inheritance. However, when there are “ample funds from which an appropriate property settlement can be made,” it can make sense to treat a recent inheritance as an entitlement of the person who inherited it.
If an inheritance is received after separation, then it is usually considered to belong only to the person who was given the money or property, and it does not become a part of the asset pool. However, the inherited money or property likely will still be counted as a financial resource that can be used by the recipient in the future. Since the court takes financial resources into account when dividing up an asset pool, this can mean a person who inherited a large sum of money may end up with a smaller amount of shared marital assets.
Get the Help From Us
Because there are so many factors that determine how an inheritance affects property division when a relationship breaks down, it is important to get legal help when a marriage or a de facto relationship is ending. OHL Lawyers provides comprehensive legal guidance to divorcing or separating partners and we can offer you assistance in fighting to protect your financial future and secure a fair portion of marital assets after divorce. Call us at 1800 770 780 or contact us via OHL@owenhodge.com.au to schedule an appointment with one of our family lawyers.