Post Separation Inheritance
How to divide property? This is one of the issues newly-separated couples typically have to face. Parties may be able to come to a compromise on their own.
If former spouse cannot come to an agreement, however, the court involvement is required. The court then:
- identifies assets and debts of the parties;
- considers what financial and non-financial contributions each party made;
- looks at each person’s future needs having regard to their age, health, financial resources, earning
- ability and child care responsibilities;
- and, finally, determines what is just in the circumstances.
Property division litigation is not a fast track exercise. The average waiting time for trial in the Family Court in Sydney is 1.5 up to 3 years. Meanwhile life goes on, spousal assets and debts may significantly increase or decrease over time. One party may inherit a fortune before the trial takes place. Will the inheritance be protected from claims of the estranged partner? The short answer is no.
The way courts treat inheritances differs significantly between cases. Generally, the court will look at:
a. What stage of the relationship the inheritance was received at. If late in the relationship or after separation, the court will treat it as a financial contribution by the spouse, but not always.
b. How big is the inheritance, particularly, compared to the total asset pool? If there are no substantial assets but the inheritance, it is possible that it will be included in the pool of property available for distribution, especially if the other spouse made significant financial or non-financial contributions to the relationship.
There is no strict formula for courts to apply. It really comes down to questions of weight the court attributes to the myriad of other contributions by both and other parties’ circumstances.
In Singerson & Joans , a recent case presented for the review of the High Court of Australia, the husband inherited about $3 million just after separation. Throughout the marriage the wife contributed significantly more as a child-carer, homemaker and bread winner. The Full Family Court noted that it was appropriate to consider not only the 4 years of contributions to the inheritance between separation and trial but across the entire 15 year relationship. It also acknowledged the initial contributions of the husband and his post separation inheritance. Court gave the wife 47.5% of all the property including the inheritance. The High Court refused husband’s application for leave to appeal against the decision. Although the husband’s argued that to say that homemaking contributions somehow applied to property acquired after marriage “does violence to the words of the statute”, the High Court disagreed with the argument.
The High Court declined to develop guidelines for Family Law Courts for post separation “windfalls” and lent support to family judges exercising their discretion in every individual set of circumstances.
If you have questions about whether particular assets will form part of the pool of property available for distribution between you and your spouse in the event of separation, or if you would like more information on the property settlement process or any other family law issue, please contact us or George Szabo at Szabo & Associates Solicitors.