Navigating Inheritance During a Split: What You Should Know

When you are dividing your assets and liabilities at separation, this is called ‘property settlement’. Sometimes, someone in the relationship might have received an inheritance and it can be difficult to know how to deal with this. That’s when seeking legal advice from Family Lawyers can help you navigate what happens with an inheritance during a split and what you should know.

In Australia, during a property settlement, the treatment of your inheritance depends on a few key factors. Despite what you might have heard, inheritances aren't automatically off-limits during the settlement process, they are also not automatically accessible to the other party. The timing of when you received the inheritance, the circumstances of your relationship, and the size of the asset pool and the inheritance, can all have an impact.

What impacts inheritance during a property settlement?

The timing of receiving the inheritance

When you or your ex received the inheritance can impact your property settlement during divorce or de facto separation.

Before or at the start of a relationship

If you received the inheritance before or at the start of your relationship, it's considered your initial contribution. While it might not be given back to you directly during the split, it does hold weight when it comes to dividing assets. However, in long-term relationships, the influence of an inheritance at the start of your relationship tends to diminish over time.

During the relationship

If you receive your inheritance during the relationship, how you and your partner used the funds, as well as the intentions of the benefactor, will determine how it's treated. If the money was used for the benefit of your family or invested in a shared asset, it's seen as your contribution.

Late in the relationship/after separation

In the case of an inheritance after separation or very late in the relationship, it's usually not seen as a direct contribution. It might be handled separately from your other assets, or two distinct asset pools might be created. If you haven't received the inheritance by the time of separation, it's typically regarded as a financial resource, which could affect the overall division of property and finances.

Intention of the benefactor

The intention of the person who left you the inheritance can also play a significant role. For example, if the inheritance was given for the benefit of the whole family, it's more likely to be factored into the pool of assets for division. Whereas it could be given for a particular person in the relationship for s specific individual purpose, therefore it might not be considered a joint asset for the benefit of the family unit. The person who received the inheritance in this case might retain the inheritance, as a resource of theirs, but the division of the assets the couple had together might be impacted because the other party to the relationship doesn't have the benefit of the inheritance resource. Every case is very specific and treated on its own merit, we encourage you to speak to us to understand the impacts of the inheritance.

Size of the asset pool

The size of your asset pool also matters. If your inheritance is larger than the assets of the relationship, and a fair division seems impossible, it might be considered part of the pool for distribution.

Finally, don't forget that every situation is unique, and it's essential to seek specific legal advice on how your inheritance might impact your property settlement.

Frequently Asked Questions About Inheritance, Separation & Divorce

Is inheritance considered property in a divorce or separation?

In general, any property, including inheritance acquired by either party of the relationship before or during the relationship (before the finalisation of divorce) may be considered in a property settlement. However, it greatly depends on many factors and is different case-to-case, so it’s best to speak to a divorce lawyer near you to discuss your potential outcomes.

How is inheritance treated in separation?

How inheritance is treated in separation depends on the situation, but it will typically be treated as part of the property pool. This does not automatically mean the contents of the inheritance will be split evenly between you and your ex, as many factors will be taken into consideration, such as when the inheritance was received, how it was used, the intention of the person who gave the inheritance and more.

How do I protect my inheritance from divorce in Australia?

One of the ways you can protect your inheritance from divorce in Australia is with a prenuptial agreement or a during-relationship agreement. The agreement would outline assets, including inheritance, and how they should be divided if separation or divorce were to occur. Talking to a family lawyer can help you explore your best options for your situation.