Podcast Episode 14: Is my ex entitled to my inheritance in the split?

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Jessica Hamilton (JH): Hello and welcome to the Family Five podcast with Ivy Law Group, where we tackle the tough family law issues in the time it takes you to drink your coffee. I’m Jessica Hamilton. I’m the Marketing Manager for Ivy Law Group, and I’m joined by my boss, Shane Neagle, who is the director of Ivy Law Group and the family lawyer extraordinaire. In this podcast, we will take a 5 in 5 approach, five questions in five minutes. Our aim is to keep the podcast light, easy to understand and to give you some valuable information to take away with you.

JH: Alright, we’re back with another episode. Today we’re talking about inheritances. How are you today, Shane?

Shane Neagle (SN): I’m fantastic. How are you going?

JH: Yeah, Alright, alright.

SN: A bit sick?

JH: Oh, just a little. But we’ll power through. Alright. So we spoke in a previous episode about the asset pool and a separation, and you briefly mentioned inheritances and that it was a big topic in its own right. So let’s talk about inheritances today. Say a couple are in the process of separating and one of the partner’s parents gives them a big inheritance, say $1 million. How does that get treated?

SN: Thanks, Jessica. It’s such an intriguing area. There’s a saying from a famous English case that says where there’s a will, there’s a relative. So normally there will be a relative seeking to have some assets come to them by way of an inheritance. It’s really important to start out to say that property, how it’s defined in the Family Law Act, comes under Section4 and that means anything in possession or reversion. Sorry about the technical definition, but reversion means anything that can potentially come to them in the future, that’s yet to come by way of an inheritance.

JH: So before we go any further, maybe we just need to take it back a step and just talk about exactly what is an inheritance. Can I just ask if money is included as property? Because an inheritance can be a property, but it could also be a cash gift, correct?

SN: Yeah, correct. Property would include cash. It would include real property, personal property such as rings and jewellery. And there’s a technical issue to do with superannuation and death benefits because sometimes they don’t form part of the estate on death. So sometimes it doesn’t go to the estate, it goes directly to someone who’s been nominated.

JH: Okay. So then maybe back to the first question where the partner’s parents gives them a big inheritance. How might this then get treated?

SN: That’s really important for people to know is that it’s not shielded from a family law property settlement, but it depends on the circumstances of the case.

Firstly, the timing of the inheritance. Was it received prior, during or after (a relationship), or has it been received at all? And did that party who did not receive the inheritance, make any contributions towards the inheritance? And what I mean there is that they may have taken their partner’s aged parent to the hospital every week, taking them on outings, mowed their lawns. Now they’ve made a contribution towards that. And the next is the amount of the inheritance relative to the asset pool. So if it was $1 million that came in and the asset pool is only $1.2 (million), including the inheritance, then that is a massive contribution.

The shortness of the relationship, anything ten years and under, that would be an important factor. So they’re the key fundamentals as to how the Court will treat it.

JH: Okay. So you’ve mentioned that it makes a difference whether the inheritance came as an initial contribution to the relationship during or post separation. And you also mentioned that the length of the relationship can be a factor. So do you want to just talk people through that?

SN: Sure. So significantly, let’s pretend we go back to the million dollar case. That’s a massive contribution to most relationships that came in at the start or during. If it came later at the end of a 20 year relationship, that’s a different sort of testings as well. If it came in a short relationship of ten years, then the court might start to treat it and separate out.

The longer the relationship – let’s just say it’s 20 years, then the court’s likely to say, and it’s a broad discretion Jessica, as this is (talking about) all the circumstances of the case, the long and short of it. There’s a very famous case called Jabour, which talks about the court assessing the myriad of contributions. And it will say, what about who looked after the children who did the home care? It’s just not this person put in the money and they should get a huge contribution. It balances itself out.

JH: Okay. So basically what you’re saying is that when it comes to an inheritance, it’s not as cut and dry as people think it is.

SN: Not at all. And then you’ve got this next scenario where we had a case where the inheritance came between the day of the mediation and two days before the court order was made, and the client there didn’t disclose the inheritance. They made the court orders. Then later on they came back and found out about it by way of a mistaken disclosure to them from someone and reopened the case and said that that should have been included. Okay.

JH: So yeah, just on that, what happens if one party does get an inheritance and they do decide to hide it?

SN: Unless the other person finds out about it, which they usually might do, everyone just keeps going on in delusion. But when they do find out, those kind of scenarios happen and the court can be very damning of you and have cost orders against you. And one of the things I have to say to people when they’re sitting in front of me is that that’s obtaining money by menaces. People fail to recognise this. They think, Oh, this is all just fun and games. But no, that’s how it can come back and bite you.

JH: What happens if, for example, elderly parents want to give their adult child an inheritance and they specify that it should only go to that adult child and not to their partner or spouse, and they sign a legal document to that effect. Will that partner still be entitled to some of that inheritance in a property settlement?

SN: *Laughs* I love how you ask these questions that seem straightforward, but they’re not. The reality is this the only way that that can be protected whilst they’re alive is to have the daughter enter a Binding Financial Agreement (BFA) with the current partner. Now, what the Court (will do) when they see that arrangement, they say: treat it as a financial resource to this person and give the other partner more of the asset main asset pool.

JH: And on that note, let’s lighten it up with a joke.

SN: After her conviction of murder in the second degree (we’re in the United States at the moment, Jessica) the district attorney, during a sentencing hearing, said, Mrs. Gray, after you put the arsenic in the stew and served it to your husband, didn’t you feel even a little remorse for what you were doing? I did, she said calmly. And when was that? When he asked for seconds, she replied.

JH: *Laughs* It sounds like something out of a Good Wife episode. All right. Thank you, everybody.

SN: Bye bye. Thank you so much.

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JH: Thanks for tuning in and don’t forget to save us to your favorites wherever you listen to your podcast so that you don’t miss an episode. It’s important to note that the contents of this podcast are intended as a general guide to the subject matter. And if you are looking for specific advice about your individual circumstances, then we would recommend getting in touch with one of our friendly family lawyers.