Post Separation Inheritances

29 November 2018

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:
        1. Treat certain assets received after separation differently in the above determination; or
        2. 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 [2015]
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 bread winner. 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 circumstance.

Holland & Holland [2017]
This case involved a 17-year marriage with two teenage children. The parties separated in 2007 and were divorced in 2012. 3.5 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 principal, 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 [2017]
This case involved an 8-year marriage with one child. 4 years after separation, the Husband received an inheritance of $430,000 from his late father. The inheritance was equated 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 made in 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.

Reiko Reynolds
Lawyer
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