Inheritance in a divorce: Who’s entitled to it?

Inheritance in a divorce: who’s entitled to it?

Many wrongly assume that wealth is split evenly between parties following a divorce. Instead, all assets and debt (known as the asset pool) are shared in a ‘fair and just’ manner according to the anticipated needs of each party as they move forward in the next stage of their lives. Age, health and earning capacities, amongst many other factors, are considered by the Court when deciding how the asset pool will be distributed.

Inheritance (whether that be money, property or in the form of something else) is an asset we’re commonly asked about. Although every case is different with many personalised contributing factors, there are five key questions the Court considers when deciding the outcome of inheritance in a divorce settlement.

  1. Who received the inheritance?
    The Court will review the will to see who is specifically listed as the beneficiary of the inheritance. It will likely be included in the asset pool if both parties have been listed as it was the deceased person’s intentions for the inheritance to be shared. However, it does not automatically mean it will be excluded from the asset pool if only one party is named on the will. If that happens, the Court will consider the following four questions. Read on!

  2. When was the inheritance received?
    Even if only one party has been listed as the beneficiary on the will, the Court will look at what stage of the de facto relationship or marriage the inheritance was received to determine if it will be included in the asset pool.

    If the heritance was received before the relationship began or in the very early stages, it is likely to be considered as an initial financial contribution to the relationship and therefore included as part of the shared asset pool.

    If the heritance was received during the relationship or marriage, it will depend if the money was used to benefit both parties, such as to buy or renovate the family home, pay household bills or go on holidays.

    If the heritance was received towards the end of the relationship, it may be considered as part of the asset pool if the property settlement has not been formalised. However, this does not necessarily mean that your ex-partner will be entitled to any of it as the Court considers many other factors and adjusts accordingly.

    If the heritance was received after the divorce was finalised, it will most likely be excluded from the asset pool as the opportunity for it to positively contribute to the relationship has declined.

  3. What were the intentions of the deceased person?
    The Court will examine what the deceased person intended the money to be used for before sharing it between both parties. If they intended for the asset to only benefit the named beneficiary, it would likely be excluded from the asset pool. However, if they intended for it to benefit the whole family, then it will likely be included.

  4. What is the relationship with the deceased?
    The Court will examine the relationship of the deceased person with both parties and the roles each party played in their life. For example, if one or both parties lived with and cared for the deceased person then it will most likely be included in the asset pool.

  5. What is the relative value of the inheritance and the asset pool?
    If the asset pool is smaller than the inheritance and its division (excluding the inheritance) is inequitable, an inheritance received towards the end of the relationship may be included in the asset pool for distribution between both parties.

As we said, there are many different factors that are considered by the Court! There is no one-size-fits-all approach. Luckily, however, our first consultations are free of charge and completely non-obligational. So, if you’d like some more specific advice sooner rather than later, get in touch with our friendly team on (03) 5996 1600 to arrange an appointment or book online here by selecting a ‘Family Law’ appointment with Josh or Simon.

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