Like most answers in law, the way the Family Court of Western Australia treats inheritance when determining a financial settlement is not “one size fits all” and will depend on the facts and circumstances of your case.
In some cases the inheritance may be included as part of the overall asset pool of the parties and in some cases it may be kept separate from the overall asset pool available for distribution.
Some of the factors that will be considered include:
- When did you receive the inheritance?
- Was it early in the relationship, during, just after separation, or is it expected to be received soon and you have not finalised your financial settlement?
- How long was your relationship?
- What are you and your ex-partner’s current and future needs?
- How was the inheritance used? Was it to the benefit of you and your ex-partner or did you use it for me, myself and I?
- How big or small was the inheritance?
- Did the deceased have specific intentions for how the beneficiary should use the inheritance?
- Did your ex-partner help care for the deceased? For example if the deceased lived with you.
- What was the size of the asset pool prior to the inheritance? Did it significantly impact the size of the asset pool available for distribution?
- Was the inheritance cash or an asset? (i.e. a property)
- Did the inheritance create future wealth by way of investment?
- Will it result in an unjust or inequitable division if the inheritance is not included?
Below are just some of the many examples of how inheritance may be treated in a financial settlement.
Inheritance received during the relationship
If you received a cash inheritance during the relationship and the inheritance was used towards the benefit of you and your ex-partner, for example, towards a deposit or mortgage on a home, generally the inheritance will be treated as a financial contribution by you. This does not mean the value of the inheritance is provided back to you, but rather the value of the inheritance and how it was applied is considered when determining your overall entitlement.
This is important because the initial financial contributions of each party are one part of the overall calculations of your entitlement in a final property settlement.
All of the factors mentioned above will also come into play here, for example if the inheritance was received early on in your relationship and the relationship was long-term, the contribution may have less weight, unless the inheritance led to future wealth or was significant in impacting the overall asset pool.
Inheritance received after separation – prior to a financial settlement
It is a common misconception that an inheritance received after separation will not be included in the overall asset pool available for distribution. The same considerations listed above will be taken into account when determining how it is treated in the overall financial settlement.
If the will states that you are to be given a gift but it has not been received, this will be classified by the Court as a financial resource. A financial resource is something that is not included in the overall asset pool available for division but is a factor that the Court must take into account when considering the overall division of the assets. This is due to the future financial benefit to one party and it may mean an increase in the non-receiving party’s entitlements.
For legal advice on how your inheritance is likely to be treated in a financial settlement, contact our Family Law team at Leach Legal on (08) 9486 9733.
20 May 2020 – Jessica Kirkman, Lawyer.