Inheritances

How are they treated, and what if I haven’t received it yet?

It is common for clients to ask, “What happens if I receive an inheritance while I am in a relationship or if I receive an inheritance after the relationship is over but there has been no formal agreement reached regarding property settlement?”

The short answer is, it depends on the circumstances.

Inheritance bequeathed but not yet received
Some clients state they have received an inheritance but in fact what they have is an imminent expectation of receiving an inheritance. This distinction is important.
If you have been notified that you are a beneficiary of a Late Person’s Estate, we suggest you inspect the Will to confirm that you are a beneficiary and to ascertain the estimated amount of your inheritance, if any.

In circumstances where a person is aware they may be about to receive an inheritance, the Family Court may consider this inheritance as a financial resource.
If you have been informed that you are a beneficiary of a Will to a person who is physically and mentally well, then in most cases, the Family Court will not consider the possibility of a future inheritance as part of a property settlement due to the uncertain nature of the possible inheritance. The primary reason being that a fit and healthy person can change their mind and alter their Will at any time and/or their financial circumstances may change prior to their death.

The amount of the Inheritance
It is essential to establish the amount and the composition of the inheritance.

The amount of the inheritance relative to the net asset pool is directly relevant to the Court’s consideration of what percentage loading, if any, should be made to a party to the relationship.
For example, if the amount or property received from the inheritance is small compared to the total assets being divided, the Court is unlikely to take this into consideration. Conversely, if the value of the assets from the relationship to be divided is small, then the Court may be more inclined to make an Order which allows for the non-beneficiary to receive some of the inheritance.
If the composition of the inheritance is of sentimental value, it is often the case that the Court will allow the intended beneficiary to retain the asset where there are sufficient assets in the net asset pool to satisfy any property settlement.

Contributions to the Inheritance
The beneficiary of the Will may often argue that the other party has not contributed to the inheritance, especially in circumstances where the inheritance was received shortly before or after the relationship broke down. On this basis, the beneficiary might seek a percentage loading in their favour for their contribution (inheritance) to the net asset pool.
In circumstances where both parties to a relationship have contributed to the bequeathed asset and/or where the non-beneficiary has significantly cared for the deceased, then there may be a counter-argument that the non-beneficiary has contributed to the inheritance and therefore the inheritance may be considered a contribution by both parties to the net asset pool.

Timing of Inheritance
The Family Court is required to consider the assets and liabilities of the parties as at the date of the hearing.
If you reach a negotiated property settlement prior to receiving the imminent inheritance and you decide to complete a Form 11 Application for Consent Orders to formalise your agreement, it necessary for you to disclose the imminent inheritance in the section relevant to the financial resources of the parties.
On this basis, the dollar value of the inheritance would not be included in the net asset pool; however, the other party may receive a percentage loading in their favour in recognition of the other party’s imminent inheritance.
If you receive the inheritance and resolve financial issues at a later time, the Family Court is more likely to include the inheritance in the net asset pool available for adjudication. The way that the inheritance is considered will depend on several factors that include, but are not limited to the amount of the inheritance relative to the net asset pool, the circumstances of the inheritance, and the subsequent use of the inheritance (i.e., towards joint assets or expenses).

Broad Discretion

The Family Court has broad discretionary powers to adjudicate each matter as they consider just and equitable in the circumstances.

On this basis, it is often difficult to predict with a high degree of certainty the impact of any inheritance on the division of the net asset pool.

Before making important decisions about separation, it is important to seek sound advice from of a person who is qualified and experienced in these matters.

Call Dimond Family Lawyers today on 9443 1111 to secure an initial fixed fee consultation with one of the professional team at Dimond Family Lawyers.

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