Can your former partner share in your inheritance on property division? You may have only become entitled to that inheritance towards the end of your relationship. Perhaps your situation is different and your inheritance was received earlier during your relationship. If so, it will be important to consider how it was used during your relationship.
Regardless of when you became entitled to the inheritance, you should not assume that it would be treated as a category or asset pool separate from the other assets of your relationship.
Can Your Inheritance be Treated as Reserved to You Only and Be Separated from the Other Assets of the Relationship?
The case law often speaks about this in terms of whether to treat an asset pool as “two pools” where an inheritance may be treated as forming one “pool” and the rest of the assets of the relationship fall into the other “pool”.
Tis is important as the court makes a decision about how to divide property between parties by considering a number of factors, including the contributions of each party to the acquisition, conservation and improvement of assets.
If an inheritance is considered as the only asset in one asset pool, then the person who received the inheritance may be treated as having made 100% of the contributions to that asset, depending upon the circumstances of the relationship of the parties.
Property Division Cases
In the recent case of Granger & Granger  FCCA 51 (January 2018) (“Granger’s case”), Orders were made for final settlement of property between parties who had been married for nearly 40 years.
The court confirmed that it has a discretion whether to use a two pools approach or to assess contributions globally to one pool of assets.
In Granger ’s case, the court considered the decision in Bonnici & Bonnici  FLC 92-272 and decided that it would only consider all of the assets in one pool. It said that if the court took a two pools approach as the Wife contended, there was a risk that the husband’s contributions during a 40 year marriage would be undervalued.
The Court referred to the decision of the Full Court in In Aleksovski & Aleksovski (1996) FLC 92-705. In that case, the wife had received a large damages award about a year prior to separation and used the money to purchase a unit.
Kay J in that case referred to the length of the parties relationship which had been some 18 years duration. The Court had to consider contributions by each party over that period towards the acquisition, conservation and improvement of assets, and towards the welfare of the marriage generally. Additionally, late in that marriage, the wife received a large capital sum as a result of a car accident.
Kay J said that “whether the capital sum was acquired early in the marriage, in the midst of the marriage or late in the marriage, the same principles apply to it. The Judge must weigh up various areas of contribution. In a short marriage, significant weight might be given to a large capital contribution. In a long marriage, other factors often assume great significance and ought not be left almost unseen by eyes dazzled by the magnitude of recently acquired capital.
A party may enter a marriage with a gold bar which sits in a bank vault for the entirety of the marriage. For 20 years the parties each strive for their mutual support and at the end of the 20 year marriage, they have the gold bar. In another scenario they enter the marriage with nothing, they strive for 20 years and on the last day the wife inherits a gold bar. In my view it matters little when the gold bar entered the relationship. What is important is to somehow give a reasonable value to all of the elements that go to making up the entirety of the marriage relationship. Just as early capital contribution is diminished by subsequent events during the marriage, late capital contribution which leads to an accelerated improvement in the value of the assets of the parties may also be given something less than directly proportional weight because of those other elements.”
In Granger’s case, the wife had received an inheritance of $700,000 in 2011, some 18 months prior to separation but had not told her husband about the size of the inheritance.
The Husband had received an inheritance of some $176,750 in mid 2005 and of that amount he had invested $100,000. That investment failed and the money was lost.
In deciding each party’s entitlement for final property settlement, the court in Granger’s case assessed each party’s contributions to the acquisition, conservation and improvement of assets, under section 79(4)(a), (b) and (c) of the Family Law Act 1975 (Cth) (“Act”) as a percentage of the total asset pool. The court also considered what is known as future needs factors under section 75(2) of the Act. The court then considered its findings in those areas to decide what was a just and equitable outcome for the parties.
The wife’s counsel argued that it was essential that the court used a “two pools” approach to assets, with certain assets including the monies remaining from the Wife’s inheritance to be placed in a separate pool. The Wife’s counsel sought that contributions to that pool be assessed separately to contributions made by the parties to the second pool of assets which contained the balance assets of the relationship.
The wife’s counsel maintained that the wife had made 100% of the contributions to that first pool of assets. Further, that the contributions of the parties were equal in relation to the second pool of assets.
The Court in Granger’s case refused to ignore the inheritance of the husband which had been received some 8 years before the marriage ended. Some $70,000.00 of that inheritance had been used to purchase a motor vehicle which was still in the current asset pool. The Court would not ignore another amount of $100,000 that had been part of the husband’s inheritance simply because it had been lost in an investment gone wrong.
The loss had resulted from a decision made by the parties during the marriage about how money should be invested. The money was not lost because the husband was reckless. It is not necessary that a contribution by a party produces a positive gain before it will be taken into account within paras 79 (4) (a) and (b) of the Act.
Whilst the husband’s inheritance was received 8 years before the marriage ended and the wife’s 18 months before, the Court said the effect of that was effectively diminished by the fact that the investment of $100,000.00 from the husband’s inheritance still existed intact a year or so before separation before that investment was lost.
The court found that contributions by the parties were not equal. The parties’ inheritances came in solely as a result of family connections. The wife’s inheritance was about 75% greater than the husband’s inheritance. Another way of looking at it was that the wife contributed an amount of $530,000.00 which was unmatched by the husband, a significant amount when the pool was $1.5m.
The court weighed and balanced all of the contributions of the parties to decide an appropriate percentage for contributions.
The parties had “had a very long marriage and throughout it they each made contributions as income earner, homemaker and parent and preserver of the rural lifestyle property they purchased by agreement very early in the marriage. The wife’s inheritance from her mother considerably exceeded the husband’s inheritance from his father in value”. Weighing and balancing all contributions, the court in Granger’s case considered that an appropriate assessment of contributions was 60% by the wife and 40% by the husband. The wife was then entitled to $905,872.20 and the husband to $603,914.80, creating a differential of $301,957.40 between their entitlements.
The court in Granger’s case decided that no adjustment in favour of the husband should be made under secton75(2) of the Act.
If you have concerns about how an inheritance may be treated in your family law property division settlement, contact our experienced Family Lawyers Brisbane to assist you to resolve your family law issues.
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