I get to keep it right?
Well, not necessarily. In the 2017 Family Law case of Calvin & McTier, the parties were married for 8 years, between 2002 and 2010. They had one child who was born in 2005 and was 12 when the case was heard. The parents had equal shared care of the child.
In 2014, 4 years after the parties had separated, and 3 years after they divorced, the husband received an inheritance from his late father’s estate, $431,000 of which remained at the time of the Court hearing. It is important to note that, although the parties had divorced, they did not have a property settlement. The wife then applied to the Court for a division of property, including the husband’s $431,000, which sum represented about 32% of the pool of assets that the Judge could divide between them.
At the trial, the husband got 75% of the assets, the inheritance having been included in the asset pool, and the wife got 25%. The Court then gave the wife a 10% loading because she had a lower income than the husband. That resulted in an overall division of the assets of 65% to the husband and 35% to the wife.
The husband was unhappy about the result and he appealed to the Full Court of the Family Court, saying that the inheritance should have been “quarantined”, rather than being treated as part of the asset pool and he should have kept the whole of the $431,000 remaining from the inheritance.
The Full Court said that it could include the inheritance in the pool of assets to be distributed between the parties and that the inheritance could be treated the same as the parties’ other assets. However, the Court confirmed that the discretion which the Family Law Act gives Judges in deciding cases meant that it was up to the Court to decide how to treat property that was acquired after the relationship ended.
So, an inheritance or a lottery win by one party after the marriage or de-facto relationship (and if there had been no property settlement) can be included in the asset pool to be divided up by the Court.
In the end, the Full Court dismissed the Appeal, so that the husband’s inheritance was treated as part of the asset pool and the wife received an adjustment for it – the husband did not get to keep all of the $431,000.
How did this situation arise? For a start, the husband no doubt relied on the fact that the wife did not apply for a division of property until more than 2 years after the Family Law Act said that she could not – the Act says you have to apply for a property settlement, or spousal maintenance, within one year of the Divorce Order becoming final. The wife applied more than 2 years after – that is, 3 years after the Divorce. However, there is a “loop hole” in the Act which effectively allows such an application to be made, especially if the party applying says that they did not know about the rule (ignorance of the law, in that case, is a defence) or that they would be financially disadvantaged if they could not apply. So, the wife did apply and was allowed to go ahead with her application which was successful.
So, could this unsatisfactory outcome, from the husband’s point of view, have been avoided? The answer is a definite “yes”. If the parties had reached agreement about a settlement and had Court Orders made by the Court, or they had entered into a Binding Financial Agreement under the Family Law Act before the husband’s father died, then the wife, apart from exceptional circumstances, could not have made a claim on the inheritance, all of which the husband could have kept.
The moral of the story? Go see your Family Lawyer, even if you are only thinking of separating – a dose of advice is much easier and less expensive than the cure – a costly and traumatic Court case, with no certainty as to the outcome.