I is for inheritance – A-Z of Family Law

One of the more frequent questions that a family lawyer receives is, will my ex be entitled to any of the inheritance I’ve received?

As always, the answer is that it depends. Several factors are relevant, including whether:

• The inheritance was received before or after separation
• If it was received before separation, how long before separation
• It was mingled amongst other assets or kept separate
• Both parties supported the deceased before their passing, or there was otherwise evidence of intention for both of the parties to receive the benefit

Perhaps the most important factor to consider, however, is that the court has significant discretion around how to ultimately deal with and assess an inheritance.

Judge Murdoch of Division 2 of the Federal Circuit and Family Court of Australia delivered a judgment in Carew & Carew [2024] FedCFamC2F 1486 that involved the assessment of an inheritance received post-separation.

The relevant facts were:

• Separation occurred in 2018 after an approximately 14-year long marriage.
• The husband’s father passed away in 2023, with a grant of probate being made in 2024 after which the husband received an inheritance of around $487,000.
• He paid about $83,000 to his mother and $64,000 to D Pty Ltd, the husband’s litigation funder.

The husband argued that:

• The inheritance should not be assessed, or if they were, they should sit within a separate pool to the other assets.
• The funds paid to his mother were repayments for legal fees.
• His legal fees should not be added back into the pool, given he had not sought for the wife’s legal fees (paid for by post-separation earnings) to be added back.

The wife submitted that:

• The sums paid to the husband’s mother and litigation funder should be added back into the pool
• The remainder of the inheritance should be included within the pool, or at least within a separate pool rather than not assessed at all
• The husband should be considered to have solely contributed to the inheritance

Key decisions that touched upon the assessment of inheritances were cited, including Bonnici & Bonnici and Calvin & McTier.

Some informative excerpts from the decision are:

• Property does not fall into a protected category merely because it is an inheritance (directly citing Bonnici) [88].
• The other party cannot be regarded as contributing significantly to an inheritance received very late in the relationship and certainly not after it has terminated, except in very unusual circumstances (a direct citation from Bonnici at[44]).
• The court ultimately retains a discretion as to how to approach the treatment of after-acquired property (directly citing Calvin) [88].

Judge Murdoch ultimately reached the following conclusions:

• Although the inheritance was received post-separation, both parties made contributions post-separation.
• It would be unjust and inequitable to exclude the inheritance.
• Legal fees would not be added back into the pool for either party.
• A two-pool approach would be utilised, comprising of the super assets (1) and the non-super assets (2), given the length of the marriage and the post-separation contributions of each party.
• Of significance post-separation is the inheritance monies received by the husband. Whilst monies have been expended by the husband from such inheritance for his legal fees, thus reducing his contribution to the property of the parties, the wife too has expended monies in payment of legal fees. This direct financial contribution weighs heavily in favour of the husband [189].

The final outcome more closely aligned with the position sought by the husband, than that of the wife.

The judgement otherwise discusses a myriad of other issues, but in relation to inheritances, the take-aways are:

1. An inheritance will not, by default, be protected from family law proceedings.
2. When the inheritance is received, as well as how it is then used, is very relevant.
3. The Court retains the discretion to exclude an inheritance, to segregate it within a different pool, or to include it within a global pool.