Inheritance is often deeply personal and emotionally significant. But when it comes to inheritance and divorce in Australia, what happens if you inherit money or property while you’re in a relationship-or even after separation but before your property settlement is finalised? Can your ex-partner claim a share?
The answer isn’t always straightforward under family law. Courts don’t treat inheritances as automatically off-limits. Instead, they look at the whole financial picture to determine what is “just and equitable.”
When Inheritances Are Brought Into a Property Settlement
The Family Law Act 1975 (Cth) (“The Act”) empowers the court to consider all assets, whether a party inherited, received as a gift, or earned them. The key question is: did the inheritance contribute to the relationship or to the couple’s financial position?
For example, the court may partly take into account an inheritance a party used to pay the mortgage, buy a family car, or fund shared expenses in the property settlement. Conversely, inheritances kept separate and untouched may be more likely to remain with the recipient.
Common Misconceptions About Inheritance and Divorce
“It’s inherited, so it’s mine forever.”
Not necessarily. If an inheritance is used to benefit the relationship or joint assets, courts may include it in the property pool.
“De facto relationships don’t count.”
This is not accurate. De facto couples have the same rights as married couples under the Act.
“I can shield an inheritance by keeping it in a separate account.”
This can sometimes be correct. Keeping funds separate helps, but if you later use it for joint benefit, it may still be considered in settlement calculations.
How to Protect Your Inheritance After Separation
Separation is both an emotional and financial turning point. Here are practical steps to protect inherited assets:
1. Binding Financial Agreements (BFA)
A BFA is a private, legally binding agreement that can:
- Protect inherited assets from future claims
- Be entered before, during, or after a relationship
- Provide clarity and certainty about asset division
Each party must receive independent legal advice, and the agreement must comply with strict legal requirements. BFAs can be challenged if unfair or not properly executed, so professional guidance is essential.
2. Consent Orders
Consent Orders formalise agreements in court and give them legal effect. They:
- Require court approval, which checks for fairness
- Avoid future disputes over inherited or other assets
- Offer certainty for both parties
3. Seek Legal Advice Before Using Inherited Funds
Even after separation, using inherited money to pay for joint expenses or invest in shared property can impact its treatment in a settlement. Professional advice ensures you understand your rights and risks.
Why It Matters
Failing to consider inherited assets carefully can result in unexpected claims during property settlement. By taking proactive steps, you can:
- Protect your inheritance
- Avoid disputes with your ex-partner
- Ensure clarity and fairness in property division
Final Thoughts
Inherited wealth is not automatically excluded from property settlements. Courts take a broad view of fairness, considering contributions, timing, and use of the assets. Whether you’ve received an inheritance recently or are planning for one, understanding your legal position is key to protecting your financial future.
Jake McKinley notes that this article is written for the purpose of providing generalised information and not to provide specialised legal advice. If you require qualified legal advice on anything mentioned in this article, our experienced team of solicitors at Jake McKinley are here to help. Please get in touch with us on 02 9232 8033 today to make an enquiry.
