The Family Law Act 1975 (Cth) provides the legal framework for property settlement in Australia. However, how does a spouses inheritance weigh in a property spilt?
Where a party to a relationship received an inheritance during the relationship it is normally included in the asset pool available for property division with the party who received the inheritance receiving an adjustment for the contribution to the asset pool.
How much weight the Court gives on account of the contribution depends on the size of the inheritance and how the moneys were used, that is whether it has been spent for everyday living expenses, for holidays or put into an asset that still exists. If an inheritance is received after separation, the inheritance may still be included in the asset pool, or considered by the Courts when assessing each parties financial circumstances.
For the purpose of a property settlement the Family Law Act defines property as “the property of the parties or either of them”.
The issue of if and how the Courts deal with an expected inheritance is different. Generally a prospective inheritance is just that a mere expectancy being a will maker’s intention at a specific time. The courts however have acknowledged that there are cases where it is “just and equitable” for the prospective inheritance to be taken into account. There is no hard and fast rule and Courts determine each case on an individual basis.
Considerations which the Court looks at when determining whether to include a prospective inheritance are:-
- The likelihood that a person will receive the inheritance. If the Will maker enjoys good health and the inheritance is not likely to be received for some time, Courts would not normally include the inheritance in the asset pool. If however the Will maker has lost the mental capacity to alter his or her will the Court is more likely to include the prospective inheritance in the asset pool.
- Whether a party to the relationship contributed to the asset to be inherited.
- The size of the inheritance. Where the Court cannot properly provide for the non-beneficiary party, the Court may be more likely to include the prospective inheritance in the asset pool.
The Courts are more likely to include a prospective inheritance in the asset pool when it is more than just likely that a spouse will receive the inheritance and it will impact on the parties future needs and financial situation.
This is a general overview. For more detailed information please contact our office.