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When property matters are not finalised in a timely manner following a separation, it can become unclear what should and should not be included in the property pool available for division.

One of the common misconceptions in family law is that an inheritance received by a party will be “excluded” from the property pool available for division following the breakdown of a marriage or de facto relationship, particularly if the inheritance was received after separation.

In family law matters, the Court needs to consider all of the assets owned by the parties as at the current date, irrespective of when the assets were acquired.

Assets acquired before the relationship, during the relationship and after separation must be considered by the Court when determining the division of the property pool.

So, if an inheritance has been received (including after separation) but a property settlement hasn’t happened yet, then the inheritance will need to be taken into account by the Court when dividing the assets between the parties.

In Calvin & McTier [2017], the parties had been married for eight years and had one child together, living with the parties on an equal basis. At the commencement of their marriage, Mr Calvin owned substantially more assets than Ms McTier. Approximately four years after separation, Mr Calvin received an inheritance. The parties were still engaged in their property dispute and had not yet had a property settlement. At the time that the orders were made, the value of the inheritance was $430,686 and represented approximately 32% of the total property pool available for division between the parties. At trial, the Court found that the inheritance should be included in the property pool and was therefore available for distribution between the parties.

On appeal, Mr Calvin argued that the inheritance should have been excluded from the property pool and ‘quarantined’ as an asset of his, because it was received several years after separation and was not connected in any way to the marriage. Mr Calvin’s appeal was unsuccessful, and the Court agreed with the trial Judge’s decision.

In another case, Holland [2017], the Court approved the decision in Calvin & McTier saying “In our view, it is wrong as a matter of principle to refer to any existing legal or equitable interests in property of the parties or either of them as ‘excluded’ or ‘immune’ from consideration in applications for orders pursuant to s 79”. In this case, the husband received an inheritance of $715,000 almost five years after separation. The wife appealed the trial Judge’s decision to treat the inheritance as a financial resource of the husband (as opposed to property available for division). On appeal, the wife successfully argued that the inheritance should treated as property of the relationship.

Both cases disprove the common misconception that an inheritance is safe from being included in the property pool and made available for distribution between the parties.

These cases also demonstrate the importance of finalising your property matters shortly after separation before the landscape of your financial circumstances change, as the same approach can apply to the increase or decrease of the value of an asset, purchase of a new asset, or a monetary gift received by either of the parties after separation.

For more information about how to divide your assets following a separation, please contact our Family Law team.

The information contained in this article is general in nature and cannot be relied on as legal advice nor does it create an engagement. Please contact one of our lawyers listed above for advice about your specific situation.