Can an ex-spouse claim against an inheritance received by the other spouse after separation? Naturally, you may think that an inheritance received after separation should be excluded from the rest of the parties’ pooled assets. However, the Court has to consider all of the parties’ assets which were acquired before the commencement of the relationship, during the relationship and after separation as well as the parties’ contributions (both financial and non-financial). Having considered all of the assets and the contributions, the Court has the discretion to do one of the following: Treat certain assets received after separation differently in the above determination; or Include assets acquired after separation in the asset pool for division between the parties. These issues were recently considered by the High Court and the Full Court of the Family Court of Australia. Singerson & Joans  The Husband inherited about $3,000,000.00 shortly after separation. The wife made significantly more financial and non-financial contributions as a homemaker, child-carer and breadwinner. The Family Court noted that not only the 4 years of contributions between separation and trial but also across the entire 15-year relationship should be considered. It also acknowledged the initial contributions made by the husband and his post-separation inheritance. The Court determined that the wife is entitled to 47.5% of all the property including the inheritance. The High Court declined to provide guidelines for Family Law Courts in respect of post-separation “windfalls” and supported that family court judges’ discretion be exercised in every individual set of circumstances. Holland & Holland  This case involved a 17-year marriage with two teenage children. The parties separated in 2007 and were divorced in 2012. Three and a half years after separation, the husband received an inheritance from his deceased brother worth approximately $715,000.00. The inheritance was excluded from the asset pool available for division and was regarded as a “financial resource”. On appeal, the Full Court of the Family Court of Australia held that as a matter of principle, an asset should not be excluded from being considered altogether in the overall property settlement. However, the Court stated that it may, in some cases, be appropriate to treat certain assets separately depending on the parties’ differing interests to such assets or the degree of contributions made by the parties to such assets. Calvin v McTier  This case involved an eight-year marriage with one child. Four years after separation, the Husband received an inheritance of $430,000 from his late father. The inheritance was equated to about 32% of the total asset pool which was about $1,340,000. The Husband argued that the inheritance should be excluded from the asset pool available for division as it has no connection to the parties’ marriage. However, the Court held that the inheritance be included and that the Husband made substantial financial contribution after separation because of the inheritance which was assessed to be 75% and the Wife’s as being 25%. The Court then made an adjustment of 10% in favour of the Wife, taking into account the disparity of the parties’ income earning capacities. The final division was 65% to the Husband and 35% to the Wife. The above cases demonstrate that all of the parties’ assets must be identified before the Court can make orders for property settlement and that the Court retains discretion as to how each asset is to be treated in each case. If assets are received after separation, the Court has the discretion to place them separately from the rest of the asset pool depending on the facts of each individual case.
When buying a home after marriage, there are many cases in which the purchase is made with the support of parents. If the marriage breaks down in such a situation, how does the court treat the funds received from the parents in the distribution of property? If there is any evidence such as a loan agreement that states that a fund is required to be repaid under certain conditions, a security deed or a record of a discussion between the parties that identifies the loan, the fund received from the parent is considered as a loan. If the money received is a gift from the parent, there is no obligation to repay it, and therefore, it is very likely that the money given to a couple in the long-term marriage will be regarded as a part of the common property. Considering whether the parent's funding was a loan or a gift, when calculating the total value of the parties' shared assets and determining their respective share, the court takes into account various factors stipulated in the Family Law Act. In many cases, it is not clear whether the parent's funding was a loan or a gift, and it often gives rise to a major problem during a divorce proceeding. For example, if a couple purchased a house for $800,000 with $400,000 in funding paid by their parents and has already paid out the loan, whether $400,000 was a loan or a gift is an important point in determining the total amount of common property. This becomes a more important issue if the amount of funding received by their parents accounts for a larger proportion in the total value. Accordingly, when considering funding a child, it is necessary to hire a lawyer in advance and to make the intent of the funding clear. Otherwise, the parents may be called upon their child’s divorce proceeding as a witness or required to submit an affidavit, which causes severe stress over a long period of time. Further, such proceedings will give rise to significant legal costs. In order not to spend too much money on legal fees during a divorce proceeding, it is recommended that parties start appropriate negotiations at an early stage for the settlement, so that things do not progress to the court due to property distribution issues.
Under family law, an initial step for parties in a divorce or separation who are seeking a distribution of matrimonial property must clarify the assets owned by the parties and obtain a valuation of each asset. In the event that the parties cannot come to a mutual agreement on the division of property, a party may apply to the court for a decision. In such a case, the court will base its decision on the value of the asset at the time of the trial rather than the value at the time of separation. This is because a considerable number of years may have passed from the date on which the separation began to the date of the trial, and a decision made based on the value of the asset at the time of separation may not be a valid (or fair) decision. There are many cases in which one party continues to live in a house that is a shared property even after separation and either one continues to pay the loan. The value of real estate is usually on an upward trend, and the amount of net assets will increase according to the repayment of the loan. The court will issue a judgment taking into consideration what each party contributed to improve the value, such as maintenance of the marriage property, renovation, etc. after the separation. In this regard, in order to obtain a judgment that properly reflects each party’s contribution in the final judgment of property distribution, a party who continues to pay the loan after separation and strives to improve the value of the property should clearly record the details of his/her contribution which can be submitted as evidence at trial. Also, if one party contributes to the improvement of the value of matrimonial property after separation, he/she should also obtain an historical valuation so that the court can take into consideration the degree and importance of such a contribution.
Q: There is an upcoming marriage between Australians who have an age gap of 10 years. The man has economic power, a house and some assets. As a condition of marriage, he said, “I want you to sign a contract which pre-determines the distribution of assets in the event of a divorce”. When he divorced his ex-wife, he stated he did not want to go through it again as it was not a pleasant experience. What is this document and what is its effect? A: It is a Financial Agreement and is more commonly known as a Prenuptial Agreement under the Family Law Act as per Part VIIIA. The main purpose of the agreement is to identify how the couple will distribute their assets should they divorce. For example, if at the time of marriage, one party has a pre-existing home or an expensive piece of artwork that may have been inherited from a parent, the prenuptial agreement will state “the house or art is not marital property at the time of the divorce and is to be excluded from distribution”. The Financial Agreement not only determines the distribution of assets but also covers child support fees and alimony. However, child support is a child’s right and there is a very likely chance that a dispute will arise in relation to its validity and is generally not covered by the Financial Agreement. A Financial Agreement can be entered into not only before marriage but also during the marriage and after divorce. Ideally, entering into a Financial Agreement will make the divorce process smoother (without having to waste unnecessary legal costs or effort). However, one thing that should be noted is that even if the Financial Agreement was considered a fair arrangement at the time, it may be considered unfair in the future. For example, 10 years later after a child is born, if an individual had been a housewife for a long period and cannot obtain a stable job, can it be considered acceptable then? In this regard, the Family Law Act has several conditions that can revoke the Financial Agreement, including situations whereby the effects of the Financial Agreement are considered unfair. To ensure the validity of the Financial Agreement, information will need to be disclosed which may be considered important, including the details of the assets and a certificate from each respective lawyer that shows advise has been provided to you in relation to the pros and cons of the Financial Agreement and the benefits and the rights of the parties(Section 90G(1)(b) of the Act).
Q: Approximately four years ago, I had a de facto relationship with a man who was my flatmate. He was busy working full-time, so I worked part-time and did the cooking, washing and cleaning of the house. Last year, with my savings (approximately $10,000) we remodelled the house. I thought we would continue to live a happy life. However, recently my boyfriend said, ‘Let’s end the relationship. Leave’. When I asked for him to give back my $10,000 used to remodel the house he said, ‘This is my house. You decided to remodel the house yourself’. Is there any way in which I can at least get some of my money back? A: If you are married and were in a de facto relationship, and (1) the relationship lasted more than two years, (2) a child was born during the relationship, and (3) “great contribution” was made for the family and it would be “very unfair” to disallow it – if any of the three requirements are met, you will have the right to a divorce and distribution of assets (s 90SB). With regards to (1), it is a matter of when the “de facto relationship” began. According to s4AA (1), a de facto relationship is “a couple that acts as though they were married but live together (genuine domestic)”. “Couple cohabitation” is determined by factors such as how a couple is using their home, if they are sexually active, sharing finances, and by taking into consideration the promises they make about each other’s lives (Section 4AA (2)). Additionally, even if the individuals themselves did not state that they were in a relationship but from a third-party perspective it was evident that they were, although it is quite rare for it to happen, it will be considered a de facto relationship in court (Smyth & Pappas  FamCA 434). This individual will need to provide evidence that it went from “flat mate from two years ago” to a “de facto relationship”. For (3), in regards to “donations”, even if the $10,000 was used for the renovation of the house, it may be considered a “money contribution”. Housework done in addition to this can also be considered “non-financial contribution” (s90SM). If it is not recognised as a contribution, you may try to convince the court that it is “very unfair”. Either way, based on the legal evidence, it would be worth persuading the man to return the $10,000. Additionally, depending on the contribution, you may be entitled to more than $10,000. What if the value of the house increased $100,000 after the renovation?