Australian law news

Can You Protect an Inheritance Prior to or Following Separation?

When two people in a relationship argue, money is often at the centre. Such an argument can become serious and protracted where the sum of money is significant, and this can certainly lead to a court case following separation. So what should you do if you expect to get an inheritance at some stage in the future? Also, what will happen if you receive that inheritance after a recent separation?

Inheritance Before Marriage or Partnership

You may be sure that you will get a sizeable inheritance but do not know exactly when this will happen. In this case, you should ideally discuss this with your partner before you enter into either a de facto relationship or marriage. This is often called a 'prenuptial', but it is essentially a financial arrangement where you agree that the inheritance will be for your benefit only. This amount of money will then be 'quarantined' so that it will not be considered in financial analysis post-separation. Other assets that are built up during the relationship will not be part of this specific agreement, and this is the best way to try and protect that future inheritance.

If such an agreement is not in place and the two parties separate, several potential solutions exist. A court will often consider the contribution of both parties to the relationship and may look back over many years as necessary to come to a conclusion. They may feel that the other party deserved some of the benefits and may include the inheritance in the asset pool to be divided. They may certainly give the inheriting spouse or partner a larger percentage of that pool, but there is no specific formula, and it will be down to the individual case.

The court may also decide that the inheritance should be quarantined at that stage even in the absence of a prenuptial agreement. Again, this will depend on how the judges view the entire relationship, the contribution and other factors.

Inheritance Post-Separation

If you received the inheritance after you were separated, you should be very careful how you treat it. It's best if you deposit the money into an individual bank account that is entirely separate from any other account that you may have held with your 'ex.'  Do not mingle it with your other assets by using some money to pay for others. Do not allow your former partner to contribute in any way to the maintenance of that new asset by, for example, carrying out renovation work on an inherited property.

Giving Advice

As you can see, this can be a complicated subject and open to interpretation. It's essential to get advice from a family lawyer and ideally before you receive the inherited funds.

To learn more, contact a family lawyer in your area.