How is an inheritance received after separation treated in your property settlement?

There is a common misconception that an inheritance received after separation will not be taken into account in your property settlement.

The Courts are required to consider all aspects of the parties’ financial circumstances when making property Orders. In the 2017 case of Calvin v McTier, the Full Court held that “all of the property then held by both of the parties or either of them can therefore be the subject of orders under s 79, regardless of when particular assets were acquired.”

In the above case, the husband had received an inheritance four years after separation. The trial Judge included the inheritance in the pool of assets for division. When the husband appealed to the Full Court, the Full Court dismissed the appeal and concluded that the Court retained a discretion to approach property acquired after separation on the individual circumstances of the case.

There are a few different approaches a Court can take when examining contributions to property interests.

A Court may take what is called a ‘global’ approach, whereby all property owned by the parties to a relationship, either solely or jointly, is pooled together. The Court will then determine the overall contribution made by either party to property within the pool and make any adjustments as required by s 75(2) of the Family Law Act (ie. for a party’s future needs).

Alternatively, a Court may take an ‘asset by asset’ approach, whereby a Court will consider the parties’ contributions to specific items of property. The Court will then divide the assets between the parties based on their respective contributions to those specific assets.

It is possible for a Court to take another approach, whereby the global approach is applied however, certain assets may be treated separately from the pool (asset by asset approach), such as an inheritance received post separation.

Accordingly, it is up to a Court to decide if an inheritance is included in the property pool, based on the individual circumstances of the case. If a Court decides to treat an inheritance as a separate asset to be retained by one party, regard must be had to s 75(2) of the Family Law Act and whether an adjustment should be made in favour of the party not receiving a benefit from the inheritance.

The varying approaches to the treatment of post separation inheritances may be a reason for parties not to delay settlement following the breakdown of their relationship.If you would like specific advice on how an inheritance will be treated in your family law matter, or as to your entitlements generally, please don’t hesitate to contact us.