Terese and Garry separated in May 2016.
In August 2016 Terese inherited a property from her father’s estate. The house is estimated to be worth $850,000 and has no liability attached to it.
"Inheritances are known as “windfalls” and are treated the same as other windfalls such as lottery wins."
At that time Terese and Garry were still negotiating how they were going to divide their assets. Once Garry found out about the inheritance he wanted the inherited house to be accounted for in the property pool when assessing each party’s entitlements.
Terese did not want the property to be included in the pool for division and was disappointed with Garry’s suggestion that it should be. Her view was that this property was inherited after separation and so should be excluded.
Inheritances are known as “windfalls” and are treated the same as other windfalls such as lottery wins.
Issues such as this commonly arise in Family Law matters. Parties regularly acquire or inherit assets post separation but before they have finalised their property settlement with their ex-partner. In such situations, many are of the view that it is a moral issue as to whether assets acquired after separation should be included in the asset pool.
More common than not, clients will request for such assets to be excluded from the pool and in some cases both parties even agree for particular assets to be excluded from the asset pool.
But is this what the law says?
The inheritance is treated as property of the party who received it and is taken into account in the overall settlement but whether or not it is in the property pool available for division is up to the discretion of the court. Here we look at three different cases:
- In the case of Norman and Norman  FamFCA 66 it was held that real estate that was inherited by one of the parties post separation was property presently held by that party and thus was required to be considered as part of the settlement.
- In Calvin & McTier (2017) FLC 93-785 the court held that “all of the property then held by both of the parties or either of them can therefore be the subject of orders under s 79, regardless of when particular assets were acquired” but also held that the court maintained a discretion to include the windfall in the pool to be divided or to deal with it separately.
- This principal was recently reaffirmed in the recent case of Holland and Holland  FamCAFC 166 where the Full Court granted the wife’s appeal on the ground that the original judge had made an error at law by treating a property the husband had inherited post separation as a financial resource rather than property.
These cases clearly confirm the principal that property cannot be excluded from consideration altogether, even when acquired after the parties have separated, but that the court maintains a discretion as to whether to include in the pool for division or not.
The above scenario reaffirms the importance of why parties should swiftly deal with the financial matters which arise from the breakdown of their relationships.
If you have separated from your partner and have not yet finalised your property settlement, you should contact today’s blog writer Ryan Thomas to obtain legal advice from a lawyer experienced in Family Law.