If you are going through a separation with your partner, it is important to know how an inheritance could impact the division of your assets. When making that assessment, there are some important considerations:
What happened with the inheritance?
It is important to determine how the money from the inheritance was spent. For example, was it put towards a mortgage, a family holiday or perhaps home renovations? In each of these examples, the inheritance was used for lifestyle purposes and/or intermingled into the overall asset pool.
Where the money has been spent on assets, it may form part of the joint asset pool to be divided between the parties. When looking at dividing your assets, a contribution to the asset pool, by way of the inheritance, may be recognised by an adjustment in that person’s favour. Meaning, they may be awarded a higher percentage of the asset pool to acknowledge the contribution of the inheritance.
It is important to note, that you will not necessarily receive your inheritance back, dollar for dollar.
If the funds were spent on a family holiday, or something of that nature, it may not result in an adjustment in your favour. This is likely to be classified as a contribution to the welfare of the family.
If your inheritance has been kept as a separate asset, then it may be looked at differently. For example, if the inheritance on its own was deposited into an interest-bearing Term Deposit account with the bank, then it may be argued that the inheritance should be treated as its “own” asset pool, separate to the joint asset pool.
What portion is the inheritance of the overall asset pool?
It is important also to consider the value of the inheritance in comparison to the overall asset pool. For example, if the inheritance makes up for approximately 60% of the asset pool (e.g., a $1,200,000 inheritance in a $2,000,000 asset pool) received in the last year of a long marriage, then it is likely that the party that contributed the inheritance would receive a significant adjustment in their favour.
Whereas, if the inheritance was $50,000 at the start of a long relationship, it is possible that there would be a very minimal or even no adjustment to the person that brought in the inheritance.
How long was your relationship?
If your relationship was less than 5 years and there were no children, it is possible that you will receive a greater adjustment for the contribution of your inheritance. This will depend on how the funds have been applied. In the alternative, if your relationship was long and you received an inheritance during, that contribution may be given less weight when working out the division of your assets. It may be classified as one of many contributions made to the relationship over the length of the relationship.
In short, there is no hard and fast rule about inheritance, and the factors are likely to vary between each individual case.
Our team of Family Lawyers at Tonkin Legal Group are here to help you with these issues. Book an appointment with us today or contact us on (03) 9435 9044.
