When one spouse inherits money after a couple separates, it can be unclear whether or not this inheritance can be included and dealt with in the couple’s property settlement. Should it be considered as part of the asset pool or should it be considered a separate financial resource? We explain everything you need to know about inheritance after separation in Australia.

Inheritance Before, During and After Separation in Australia

Any inheritance received early in the relationship or before a couple starts living together will most likely be treated as an initial contribution to the marriage, therefore, part of the asset pool. If the inheritance was received during the relationship, chances are the benefactors’ intentions was for the funds to benefit both spouses; for example to be put towards renovating a home, or for a holiday. In these two instances, inheritance would generally be treated as a monetary contribution to the shared asset pool.

It is a general rule that inheritance received late in the relationship or after separation will not be viewed as a contribution to the shared asset pool. However, each matter is dealt with case-by-case, and certain circumstances may lead to both spouses receiving funds. For example, if the benefactor was the wife’s father and the husband had a close relationship with the father-in-law and even cared for him during the illness, the Court may find that both parties are entitled to the inheritance. Should one party receive inheritance after separation, this property may be considered a financial resource rather than an asset. This means is that the inheritance should not be included in the total asset pool to be divided.

Asset by Asset vs Global Approach

The Court mostly adopts a “global approach” to property settlement by pooling all the property, valuing it and then dividing it. However, the Court may also adopt the “asset by asset” approach, meaning the inheritance will be considered a financial resource and separate from the other assets. This approach is more complex than the “global approach”, and is rarely taken. The “asset by asset” approach may be used if the inheritance was received later in the relationship, after separation or if the relationship was short and both parties kept their assets separate.

Holland vs Holland

While it may seem that inheritance is relatively safe when received after separation, there have been cases in Australia where inheritance has been ruled as a joint asset.

In the case of Holland vs Holland from 2017, the husband and wife were married for 17 years before deciding to separate. The husband received an inheritance amount of $715,000 five years after separation, but prior to the divorce. The trial judge excluded this inheritance from the pool and treated it as a “financial resource”. However, the wife appealed this decision, stating that this amount should be included as an asset and divided accordingly. The Court granted the wife’s appeal, stating that it was incorrect to deem the inheritance as a financial resource of the husband only.

This case illustrates the importance of finalising financial matters as soon as possible after separation.

Speak to a Lawyer About Your Inheritance After Separation

If you have recently separated from your spouse and you believe you are entitled to an inheritance received after separating, we do recommend seeking legal advice immediately. Contact us to speak to our lawyers and find out how we can assist you with dividing inheritance in you property settlement.