Family Law Blog

Inheritance in Separation – How does Family Law treat an Inheritance?

Sometimes during a marriage or while parties are going through the separation process, one becomes entitled to, or receives, an inheritance.

Perhaps a parent or grandparent passed away, and as part of the estate process, it becomes clear that you will likely receive a payment.

So what’s likely to happen when it comes to inheritance in separation?

The Big Picture

Generally speaking, you should expect that an inheritance received any time before final orders are made (whether by consent or otherwise) in relation to the property distribution will need to be taken into account.

The Court will usually treat the inheritance as part of the overall property pool.

That said, it does not automatically follow that the benefits of an inheritance will be split evenly between you and your ex, as there are multiple other factors at play.

When Was the Inheritance Received?

The timing of any inheritance will be quite material to the overall question.

As you would expect, if you receive an inheritance in year 1 of a 20 year relationship, then that will be different than receiving an inheritance 1 day prior to consent orders being filed in the Court during your separation.

So, for example, if one spouse “contributes” a significant inheritance reasonably close towards the end of a relationship, it may well be that spouse will receive an appropriate balancing correction in their favour when it comes to assessing contributions to the relationship.

How was the Inheritance Used, if at All?

One relevant factor is how the inheritance was actually used.

So if one partner used $100k from a family inheritance to help buy the family home, then that will be taken into account as a contribution.

Similarly, if works or improvements were made using the inheritance that one party was otherwise entitled to, it will likely be taken into account as a contribution that party has made towards the overall property pool and potentially rebalanced in their favour.

In one example, the Court agreed to rebalance the parties’ contributions in a husband’s favour as a result of a large inheritance that had been invested with the proceeds used to the benefit of the relationship.

What was the Intention of the Person Giving the Inheritance?

While an inheritance may be expressed as going to a particular individual (for example, a parent to their child) it might be that their intention was really to leave the money to the entire family. If that is the case, then the contributions of the inheritance might not be counted to only one parties’ benefit.

If there is evidence that the true intention was to make a bequeath to the whole family (or both spouses), then the Court will take those intentions into account when determining how best to treat an inheritance.

Of course that evidence can be tricky to come by, especially after someone has passed away.

Can You Just Not Disclose your Inheritance?

If you receive an inheritance in the middle of a separation it’s pretty tempting to just avoid disclosing it.

But this is a bad idea.

Inevitably somebody will find out that you failed to disclose a material asset.

Even if you are filing consent orders with your spouse, those orders can be set aside later if the Court believes there was a material non-disclosure.

So, while you might be tempted to do otherwise, it’s still best to disclose, get advice, and ensure you’re taking every step possible to secure a fair distribution of the relevant assets.

Have you Received an Inheritance and are in Separation?

Because of the size of some inheritances and the potential for significant debate about its impact on the property distribution, it is almost always best to get advice about how best to deal with it.

If that’s you, then get in touch and we can help.

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