By Jessica Strangio, Senior Lawyer
There always seems to be some confusion when inheritances are thrown into the property pool matrix, no matter what side you are on in a family law property dispute. When taking a look at how the Court has dealt with inheritance received when determining a division of assets pursuant to section 79 of the Family Law Act 1975 (Cth), two questions could be asked, which, in broad terms, are:
- Should the inheritance be treated as property for the purposes of a section 79 claim?
- Is it just and equitable to alter the interests in the inheritance in the circumstances of the case?
The Court’s answers to these two questions have continued to develop, particularly in recent years, and provide some clarity for litigants or parties about how an inheritance may be treated in the circumstances of the matter at hand.
In Calvin & McTier [2017] Fam CAFC 125, the Full Court found that where an inheritance is received during a relationship and post-separation, the Court must consider the evidence about:
- The quantum of the inheritance, and
- How the inheritance was applied.
It was held that, “all of the property held by the parties or either of them can be subject to Orders under s79 regardless of when particular assets were acquired.” And, “in short, we consider that the court retains a discretion as to how to approach the treatment of after acquired property.” This matter has become the leading authority in relation to inheritances, being a matter that dealt with an inheritance that was specifically quantified and seen as a contribution by the receiving party. It demonstrated clearly that inheritances form part of the property pool.
Shortly after Calvin & McTier, the Full Court distinguished between treating an inheritance as property or a financial resource, but remained of the position that a judge has discretion about how an inheritance is treated in the property pool to be distributed (Holland & Holland [2017] FamCAFC 166). The Court referred to their previous decision in Calvin & McTier and confirmed that an inheritance, particularly where the parties have a present entitlement, should be included as property and not simply a financial resource. The Court very clearly outlined that inheritances, especially those that are quantified, fall within the definition of property.
Further guidance has since been provided on inheritances, in Tappert & Tappert [2020] where the Court drew a distinction between inheritances that are quantified (have a value) and those that have not been quantified (where the value is unknown or the estate not properly distributed). Where an inheritance had not yet been quantified, or applied, it was appropriate to treat it as a financial resource. This case requires parties to consider more carefully the question, ‘should it be treated as property?’ and indicates that it is not as simple as saying an inheritance is property because a party is a beneficiary or will be a beneficiary. A closer analysis of the details of the inheritance should be considered.
In 2023, the matters of Stella & Stella [2023] FedFamC1F 1092 and Orozco & Bonilla [2023] provided some further clarity about the second question parties should consider being, ‘whether it is just and equitable to alter the interests in the inheritance in the circumstances.’ In Stella, the Court found that it was not just and equitable to alter the inheritance interests. Here, both parties respectively received an inheritance from the husband’s grandmother. The inheritances were placed in a separate pool by the trial judge, and no adjustment was made on this basis. No additional contributions were made by either party by virtue of the inheritances and therefore not necessary to include them in the same pool
In Orozco & Bonilla, the judge found that it was just and equitable in the circumstances to alter the interests with the inheritance included because if they didn’t, an unjust overall division would occur. That is not to say that the applicant shouldn’t get an adjustment in their favour, but the inheritance should be included in the property pool as part of the assets to divide.
The above timeline certainly identifies the issues to be considered when dealing with inheritances. The law in relation to inheritances and other relevant contributions is ever evolving, and parties should ensure they are advised as to the law applicable to their matter. Here, at Rafton Family Lawyers, we have the benefit of both our estate planning team and family law specialists to provide a wholistic approach to advising clients in navigating these difficult times.
For more information or to enquire about a consultation, contact us at reception@rafton.com.au