Will Your Inheritance Be Included in the Property Settlement?

In the recent case of Calvin & McTier [2017] FamCAFC 125 the Family Court had to consider whether the inheritance was to be included in the property settlement. In this case, the Court decided to include a significant inheritance received by the husband after separation in the assets available for division between the parties.

This case is a timely reminder that the Court, has a wide discretion and can treat an inheritance acquired after separation as part of the property to be divided between the parties, or alternatively as an asset which is treated altogether differently from the pool of assets available for division. In either scenario, the question remains what weight will be given to the contributions of the parties. Each case is different and it is important to obtain early advice from an experienced family lawyer about how it may be treated.

The facts

The husband and the wife were married on 2 February 2002, separated on 9 April 2010 and were divorced on 2 August 2011. Their relationship lasted for approximately 8 years. They had one child together who was born in 2005.

In January 2014, the husband received an inheritance from his late father’s estate. At the time of the hearing, the husband had dealt with part of those assets, however, the remainder of the inheritance included assets with a total value of $430,686. The inheritance made up approximately 32% of the assets pool available for division at trial.

On 21 January 2015, the wife commenced proceedings for property settlement, over two years after the time limit had expired for her to do so. She was granted leave on 5 March 2015 to bring that application out of time.

The Court found that although the parties’ contributions during the relationship were equal, the husband’s post-separation contributions were significantly greater than the wife’s because he had received the inheritance and had equal care for the parties’ child.

The Court decided that the husband was entitled to 75% of the net pool of assets and resources, including the inheritance, and made an adjustment of 10% to the wife to reflect the disparity in income and earning capacity between the husband and the wife. This resulted in an overall split of the assets in proportions, 65% to the husband and 35% to the wife.

The husband appealed the decision to the Full Court of the Family Court of Australia, arguing that there was insufficient connection between the marriage which had long ended, and the inheritance which the husband received from his father almost 4 years after separation.

The Full Court confirmed that: –

1. the Court had the power to include the inheritance in the pool available for division and make orders in relation to the inheritance, regardless of when it was acquired.
2. the oft-cited decision of Stanford (in which the High Court of Australia confirmed that it may not always be just and equitable for the Court to alter the parties’ existing ownership of property) did not require property acquired after separation to be treated any differently to that of property acquired during the relationship, nor did it require the Court to have a specific reason to interfere with any particular asset of the parties (i.e. the inheritance); and
3. there was no requirement for nexus between any specific asset owned by one of the parties, and to the marriage.

The Full Court stopped short of confirming that, as a blanket rule, the Court should always include an inheritance acquired after separation in the pool available for division, and confirmed that “In short, we consider that the Court retains a discretion as to how to approach the treatment of after-acquired property”.