How does the possibility of a future inheritance affect a property settlement?
Written on the 19 September 2013 by Matthew Carney
There is no absolute rule; it will depend on the circumstances.
The issue has been the subject of a number of applications for property settlement over the years and below I set out how the Courts have dealt with such applications.
The most well known case is Tulloch v White. In this case, the husband argued that his former wife had an expectation of inheritance from her mother’s estate. The wife’s mother was aged 81, a widower, in reasonable health and had two surviving adult children, one being the wife.
The husband essentially argued that the mother’s Will left a half share of her estate to the wife, therefore creating the expectation.
The husband’s argument was rejected by the Court. In so rejecting it, the Court stated:
“We do not consider there is any absolute rule. The ultimate criterion is whether the evidence is, or may be, relevant to the just and equitable process. An expectancy of inheritance will not be relevant in many proceedings. In the end, relevance must depend upon the nature of the claims being put forward and the facts of the particular case... there must be a worthwhile connection between a specific element of the party’s case and the suggested expectancy…It is ultimately a question of fact and degree. During the course of argument a number of obvious examples at each end of the spectrum were referred to. In a case where the testator had already made a will favourable to the party but no longer had testamentary capacity and there was evidence of his or her likely impending death in circumstances where there may be a significant estate, and where there was a connection to s 75(2) factors, it would be shutting one’s eyes to realities to treat that as irrelevant. On the other hand, the bald assertion that one of the parties has an elderly relative who has property and is or is likely to benefit that party is so speculative that it would be inappropriate to contemplate it as relevant in a s 79 determination, it being too remote to affect the justice and equity of the case in any worthwhile way.”
Essentially, the Court took the view that there was no obligation on the wife’s mother to choose to benefit the wife or any other person or institution and furthermore, even if there was, any such benefit may be eroded over time by intervening events, such as expensive medical care and treatment, donations to third parties or institutions or other economic uncertainties.
However, the Court also stated that “we do not consider there is any absolute rule” and there may well be circumstances when the Court will make an adjustment due to an expected inheritance.
Such circumstances arose in the case of De Angelis & De Angelis. In this case, again there was an application by the husband in relation to the wife’s expected inheritance from the wife’s mother’s estate. However, in this case, there was evidence that the husband had undertaken a considerable amount of work on properties owned by the wife’s mother, at no cost. The Court stated:
“we think it important to remember that the Court is required…to accord justice and equity to both parties. The question therefore has to be asked whether, in the present case, it would be just and equitable to the husband for the Court to have ignored the probability that, in what could well be [a] very short period of time (given the ages of her aunt and mother), the wife could well be the owner of two properties having a combined value of almost the same amount as the value of the parties’ property currently available for distribution, and particularly in circumstances where the husband had been found to have done substantial improvement and maintenance work on both properties? ... We consider that it would have been unjust to the husband to ignore this matter even if it was categorised only as a possibility and not a probability”.
De Angelis can be contrasted against the case Tulloch as a consequence of the significant works that the husband undertook to the properties. The husband through his contributions had significantly improved the value of the properties which the wife would likely benefit from.
While the general rule is that the Court will not take into consideration the expectation of an inheritance there are exceptions. In such situations, the Court also has the power to adjourn proceedings if there is likely to be a significant change in the financial circumstances of the parties to the marriage or either of them.
Author: Matthew Carney