Family Law Property Settlement & Inheritances Received after Separation

How will an inheritance or property acquired after separation by one party be treated in a family law property settlement?

Family Law Property Settlement

In Holland and Holland, the Full Court of the Family Court of Australia considered on appeal how an inheritance received by the Husband should be treated in a family law property settlement.

The couple had lived together for some 17 years before they separated in July 2007.

About three and a half years after separation, the Husband inherited property (“W Property”) under his brother’s Will. At the time that he inherited the property, it was subject to a mortgage of $83,000. When it came to the final hearing, this meant the Husband’s parents had paid out that mortgage and the property had an agreed value of some $715,000.

On appeal, the Wife argued that the trial judge had in error treated the inheritance as a “financial resource” rather than as “property of the parties to the marriage or either of them”. (new sentence) Consequently, the Judge had not included that property amongst the assets available to be divided between the former couple.

The Court referred to the Full Court decision in Norman & Norman which effectively said that the fact that property is acquired by one or both parties after they have ceased cohabitation does not have the effect of removing that property from consideration in the family law property settlement between the parties. The “property of the parties or either or them” in respect of which the Court may make property orders includes all property of whatever type, whenever acquired.

The Court noted that Orders may be made pursuant to  s 79 of the Family Law Act 1975 (Cth) altering interests in respect of “property”. Orders cannot be made under that section altering interests in “financial resources”. However, financial resources can be taken into account as to what property orders are made under s79  when “s 75(2) factors” are considered.  Those factors take into account the future needs of the parties.

The Husband had a vested interest in W Property and the Full Court found that that interest could not be treated as a “financial resource”. Instead, it was property of the Husband. The Court also referred to the recent discussion in Calvin & McTier.

The Court found that characterising property as “an inheritance” or as “after-acquired” property (ie., acquired after separation) did not mean that it could not be included in the assets available for division unless no contributions to that property could be established.  Section 79 of the Family Law Act 1975 (Cth) is directed to all of the existing legal and equitable interests in property of the parties or either of them without exclusion of any of those interests.

The Court also noted however that contributions made towards the acquisition of such an asset by one party and the lack of contributions made towards its acquisition by the other party may be an important factor in the way in which the Court exercises its discretion in making property orders.