Former spouses dealing with the division of the property pool in family law property settlement matters are ordinarily, and understandably, going through a difficult and acrimonious period of their lives. Imagine when one party receives an inheritance from the death of a beloved one and is subsequently told that this is included as an asset to be considered in the property pool after they separated from their partner.
Often, people attempt to assert that any inheritance they receive is for their sole benefit and that the ex-spouse or partner should not receive a cent. At the very least, they should be reimbursed the entirety of the inheritance, which was applied towards the accumulation of assets or the benefit of the family. However, as always in any legal dispute, this would depend on several circumstances upon receipt of the inheritance.
So, what factors does the Court consider when dealing with inheritance becomes an issue?
The treatment of inheritance in a family law property settlement depends on various factors. A summary of these elements encompasses:
1. Timing and Duration of Relationship:
The timing of the inheritance can influence how the inheritance is treated in a property settlement. What is received before the relationship, during the relationship or after separation? If the inheritance was received before or during the relationship commenced, it may be considered a significant contribution on behalf of the party in receipt of the inheritance. Inheritances are often utilised as ‘springboards’ for parties to accumulate assets and derive an income, for example, via the purchase of investment properties or to purchase their family home, which appreciates the value of the net property pool and should be given recognition.
Another factor to consider is the duration of the relationship. The court may assess an inheritance received during a 30-year marriage differently from one received during a 5-year marriage.
When an inheritance is received following separation, parties often attempt to argue that the asset, whether cash sitting in a bank account or real estate, should be ‘quarantined’ from the matrimonial property pool, where one balance sheet comprises the assets and liabilities accumulated together during the relationship by the two parties. In contrast, the other balance sheet is considered separately and comprises only the inheritance.
2. Size:
The size of the inheritance received, and the net value of the asset pool also come into effect. For example, the contribution of a $20,000 inheritance in a $1,000,000 property pool will differ from that of a $100,000 inheritance in a pool valued at $300,000.
3. Use:
How the inheritance was used or dealt with during the relationship can also impact its treatment in a property settlement. Suppose the inheritance was kept separate from joint assets and not intermingled with the unified parties’ assets accumulated over the marriage, such as a separate property situated overseas which is self-sustained and did not require any financial contribution from the couple. Under this circumstance, it could be argued that the inheritance should be retained by Party A and not shared with the former spouse, Party B. However, this argument has various caveats. On the other hand, suppose the inheritance was used for joint purposes or to benefit both parties. In this case, it would be considered a joint asset subject to division. The issue would be the emphasis placed on assessing the size of this contribution compared to the other factors mentioned in this article.
4. Future Needs:
The Court will then also consider future factors and give due consideration to the parties’ respective income-earning capacities, the health of each party, and whether there are any children involved, as the parent who is the primary carer would bear a more significant financial burden.
In all property proceedings, the Court also looks at the overall circumstances of the case. It will then determine whether any adjustment should be based on the principle: ‘Is it just and equitable for these orders to be made?’.
For example, consider a scenario where the inheritance constitutes the majority of the asset pool and is received by one party, Party A, shortly before separation. The other party, Party B, is unemployed and caring for four children and has no assets in their name. Is it just and equitable for an order to grant Party B only a minimal amount, or perhaps a more substantial portion, to ensure their financial stability?
Once again, the above example will depend on various other variables and considerations, which require the expertise of a family law property lawyer. An expert in this field can gather the relevant information, analyse each factor, and explain every aspect clearly and comprehensively.
Ensuring a Just and Equitable Property Settlement
While an inheritance may be initially treated as a separate asset, the court may still consider factors such as the parties’ financial needs and contributions when determining how it ought to be divided.
After all the facts of the matter are laid bare, the final factor involves ensuring a just and equitable division of property, considering all relevant factors. All the above factors are intertwined and given due consideration when determining an inheritance and how it should be treated in a family law property separation.
Whilst there are voluminous principles and cases for the Court to consider, there is no fixed formula for a Judge to use a ‘mathematical approach’. However, there are guidelines whereby the Court aims to achieve a fair result and considers the individual circumstances of the parties involved, including the circumstances set out above regarding the receipt of inheritance as a beneficiary of an estate.
Parties should seek legal advice to understand their rights and the appropriate treatment regarding inheritance when negotiating a property settlement or court proceedings.
How can Madison Marcus HELP YOU?
At Madison Marcus, our specialised Family Law team is dedicated to supporting and assisting you in difficult situations that can be challenging and emotional. We believe that having the guidance and support of our experienced family law professionals can make a significant difference in ensuring that your legal rights and obligations are protected. You can be confident that you will have the support and guidance to navigate the legal landscape effectively.
