How Inheritance and Divorce and Separation Works in Australia

Clarity Lawyers Blog Inheritance And Divorce And Separation Works In Australia

When relationships break down, dividing assets can become a complex and emotionally charged process. This division sometimes includes not just shared property and finances but also individual inheritances. Whether you’re married or in a de facto relationship, understanding how inheritance is treated during a separation is crucial for safeguarding your assets and rights.

In this article, our property settlement lawyers from Newcastle delve into how inheritance is handled in both marriages and de facto relationships and provide practical advice on protecting your inheritance during property settlements. By understanding the intricacies of inheritance and divorce, you’ll be better equipped to manage your financial contributions and preserve your overall asset pool during the property settlement process.

Understanding Inheritance in Australian Law

Inheritance in the context of family law refers to the assets or property received from a deceased family member or relative. It’s important to distinguish inheritance from other marital assets, as it can be treated differently during a divorce or separation. Additionally, the intentions and instructions of the person leaving the inheritance can play a role in how it is treated under Australian family law.

Under Australian law, inheritance is generally considered a financial resource rather than a direct contribution to the asset pool of the marriage or de facto relationship. However, the specific circumstances of how and when the inheritance was received, as well as any stipulations made by the benefactor, can significantly impact its treatment in property settlements. The Family Court considers various factors, such as the size of the inheritance, its usage during the relationship, and whether it has been mingled with joint assets.

Inheritance received can be protected from being included in the joint asset pool through strategies like keeping it separate from other assets, creating binding financial agreements, and maintaining clear records. Seeking legal advice is crucial to ensure that your inheritance is treated appropriately and remains a protected asset during a property settlement.


Inheritance and Marriage

When it comes to marriage, inheritance is typically treated as a separate asset from the marital property. However, this does not mean that it is entirely immune to division during a divorce settlement. The Family Court looks at several factors to determine whether an inheritance should be included in the asset pool for distribution.

Key considerations include the timing, the benefactors intentions, and use of the inheritance. If the inheritance was received before the marriage and kept separate from marital assets, it is more likely to be treated as an individual asset. However, if the inheritance was received during the marriage and used for joint purposes, such as purchasing a family home or paying household expenses, or the benefactor stipulated that it was to be used for the whole family to benefit from, it may be considered part of the marital assets.

The court also examines the overall asset pool and the initial financial contribution of each party. If the inheritance represents a significant portion of the asset pool compared to the other assets, it may influence the final property settlement. An experienced family lawyer can help navigate these complexities and provide guidance on how to best protect your inheritance during a divorce.

Inheritance and De Facto Relationships

De facto relationships, defined under Australian law as couples living together on a genuine domestic basis but not legally married, are treated similarly to marriages when it comes to property settlements. Inheritance in de facto relationships is assessed based on similar criteria as in marriages, with particular attention to how the inheritance was received and utilised during the relationship.

If an inheritance was received by one partner before the start of the de facto relationship and kept separate from joint assets, it is more likely to be considered an individual asset. However, if the inheritance was used for joint purposes or mingled with the couple’s shared assets, it may be included in the joint asset pool during a property settlement matter.

The Family Court takes into account the same factors as in marriages, such as the size of the inheritance, the overall asset pool, and each party’s initial contributions. Legal strategies, such as binding financial agreements, can help protect an inheritance from being subject to division. Seeking legal advice from experienced family lawyers is essential to navigate the complexities of inheritance and property settlements in de facto relationships.

Protecting Your Inheritance

Protecting your inheritance during a divorce or separation requires careful planning and legal strategies. Here are some key steps to help safeguard your inheritance:

  1. Binding Financial Agreements: One of the most effective ways to protect your inheritance is through a binding financial agreement (BFA). This legal document outlines how assets, including inheritance, will be handled in the event of a separation. BFAs can be made before, during, or after the relationship and must be drafted with the assistance of experienced family lawyers to ensure they are legally binding. It’s important to note, a financial agreement could potentially be set aside – however, working with a lawyer to create it will give you every chance to have it remain legally binding.
  2. Keep Inheritance Separate: To prevent your inheritance from being included in the joint asset pool, it’s crucial to keep it separate from marital or shared assets. Avoid using inherited funds for joint expenses or investments. Instead, maintain separate bank accounts and clear records of how the inheritance is managed.
  3. Documentation and Clear Records: Maintaining thorough documentation of your inheritance is vital. This includes keeping records of when and how the inheritance was received, any correspondence related to the inheritance, and evidence of how the inheritance has been used or invested. Clear records can help demonstrate that the inheritance is a distinct asset, separate from the marital or joint asset pool.
  4. Seek Legal Advice: Navigating the complexities of inheritance and property settlements requires expert legal advice. Consulting with experienced family lawyers can help you understand your rights and develop strategies to protect your inheritance. They can guide you through the process of drafting binding financial agreements and provide tailored advice based on your specific circumstances.

By taking these steps, you can better protect your inheritance from being subject to division during a property settlement. Understanding the legal landscape and seeking professional advice are crucial for ensuring your financial contributions and assets remain safeguarded.

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Need Help with Inheritance and Property Settlements?

Inheritance can add an extra layer of complexity to divorce and separation proceedings. Whether you are married or in a de facto relationship, understanding how inheritance is treated under Australian family law is essential. By keeping your inheritance separate, maintaining clear documentation, and seeking legal advice, you can better protect your financial future.

At Clarity Lawyers, we are here to provide the expertise and support you need during these challenging family law matters. If you have any questions or need assistance with a property settlement involving inheritance, don’t hesitate to reach out to our experienced team.

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Rli Samantha@2x
Samantha Miller

Samantha has been a lawyer since 2001 having followed in the steps of her father, grandfather, great-grandfather and great-great-grandfather. No one can say she didn’t know what she was getting into!

Initially admitted in 2001 as a solicitor in NSW and Australia, Samantha moved to the UK where she was admitted as a solicitor in England and Wales in 2002. After working in several different areas of the law in large London firms, she determined that family law was her calling and hasn’t looked back.


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