Protecting Your Inheritance After Divorce


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Protecting Your Inheritance After Divorce

The division of assets can be a highly contentious matter during and after a divorce or separation. Bringing an inheritance into the mix can create further conflict. 

What happens if you receive an inheritance prior to separation? Do you get it back as part of your property settlement entitlement?

What happens if you receive an inheritance or anticipate receiving an inheritance in the future? Should a future inheritance or one received after separation or divorce form part of the ‘property pool’? 

There are many legal issues to consider. Each case is different.

Protecting Inheritance After Divorce

To start, we need to look at the timing of when the inheritance was received.

Inheritance Received During Your Relationship or Marriage

If for example, during the marriage, a relative died and you received an inheritance, this would generally form part of the net pool available for division should you separate or divorce. This is particularly the case where the inheritance was then contributed to say the family home along with the normal repayments and savings. 

Although the inheritance will form part of the pool available for division between you and your former spouse, the inheritance is normally considered to be a contribution of the spouse that received the inheritance. 

Here are some key factors we consider when we advise clients as to how the Court will treat an inheritance received during the relationship:

  • Was the inheritance received early on in a lengthy relationship or just before separation in a short relationship?
  • Did BOTH parties make use of the inheritance, or was it only used to benefit one spouse?
  • How was the inheritance used? Did it benefit the family? (e.g. to improve the financial standing of the family).
  • What is the net worth of the inheritance? (Particularly in comparison to the size of the parties’ joint asset pool prior to receiving it).

Inheritance Received After Divorce or Separation

What if I receive an inheritance after my Property Settlement?

Any inheritance received after you have resolved property settlement matters on a final basis will NOT be subject to division of assets as long as you have formalised the property settlement with either a Consent Order, Court Order or Binding Financial Agreement.

For this reason, financial or property matters should be finalized legally as soon as possible so that a former spouse or partner does not get the benefit of an inheritance received after separation.

Note: Judges have the discretionary powers to re-open matters, but this only happens in rare cases and when circumstances warrant it.

Prospective Inheritance

Generally, a prospective inheritance is not taken into account unless special criteria are met. The reasoning behind this is that whilst a person is able to change their Will, there is no guarantee that you will actually inherit. The prospective inheritance does not form part of the asset pool and is not considered a financial resource. 

A future inheritance may be considered a financial resource if the living testator has ceased to have testamentary capacity (does not have capacity to change their Will). It may be relevant to consider in terms of which partner or spouse has the greater future needs.

Financial safeguards, including protecting the inheritance of each party can be an uncomfortable subject matter for couples. It is best to seek legal advice from your Family Law solicitor to help you navigate through the process. If you have any questions, contact us for a FREE initial consultation, and we’d be happy to assist. 

Related Articles:

Is My Spouse Entitled To My Inheritance

$3 million post-separation inheritance – part of the pool?