Substantial Late Inheritance Not Quarantined

Home News Substantial Late Inheritance Not Quarantined

A recent decision by the Full Court of the Family Court of Australia starkly highlights a way in which inheritances are sometimes dealt with after separation. No doubt, the way in which this inheritance was dealt with will leave a bad taste in the mouth of many separating couples.

In this particular case, the parties had been married for about fifteen (15) years and had been separated for about four (4) years prior to the Trial. There were two (2) children of the marriage.

The Wife had run successful businesses throughout the relationship and was also the primary carer to the two (2) children.

At around the time of separation the parties net matrimonial estate was worth somewhere in the vicinity of $4.5 million. At or around the time of separation, the Husband’s father passed away and he received a substantial inheritance of some $3 million. By the time of the Trial four (4) years later this had dwindled to about $2.5 million. The Wife had continued to run the parties business interests and care for the two (2) children substantially for the four (4) years leading up to the Trial.

In assessing contributions the Full Court overruled the Trial Judge and ordered that contributions be assessed on the totality of the matrimonial assets (some $7 million including the inheritance) as to 52.5% to the Husband and 47.5% to the Wife.

Effectively, the substantial inheritance received by the Husband after separation had not only been included in the pool but the Wife had received in effect a good sized proportion of it.

This was a case, where the Family Court had assessed that the Wife had made greater contributions in relation to establishing the parties’ business interests and the care of the children. The Wife therefore would have received an entitlement of greater than 50% if not for the inheritance.

However, the interesting aspect of this case is that the Full Court were clear that the best approach was to globally look at all of the assets and to look holistically at each parties contributions (whatever they may be) from the commencement of the time they got together until the current date. This assessment recognised the late contribution by the Husband of his father’s estate but also recognised other substantial contributions made by the Wife.

Many people reading this may form a view that the Court was overly generous to the Wife and that the correct thing to do would have been to exclude an inheritance received from the Husband’s father.

Whatever one’s personal view may be, the case is a very stark reminder of the fact that the Court can take into consideration and provide a percentage split to either party of substantial inheritances even if those inheritances are received late in the relationship and even after separation. Each case will depend upon its facts but this case is a certainly a startling reminder of the effect the law can have.

If couples wish to quarantine inheritances that either may receive during the relationship than this can be done through a Binding Financial Agreement (either done before the marriage or during the marriage) that can specifically quarantine inheritances and prevent situations such as in this recent case occurring.

Also, this case illustrates the needs for parties to resolve their financial issues sooner rather than later after separation. In this case the Husband’s father died around the time of separation but it still took four (4) years for the matter to be resolved. In many cases, a period of four (4) to five (5) years after separation can allow the opportunity for many things to arise post-separation which can complicate a property settlement.

The advantage in trying to resolve property settlement sensibly and soon after separation is that assets can be clearly identified and valued and the impact of what each party may or may not do after separation will have little or no impact. In some cases, it is just not possible to do this but it should always be a focus to resolve financial issues once the emotional relationship has ended.

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