Clients often ask us how family law works with property acquired after separation, including things such as inheritances. The short answer is that you and your former partner can agree to exclude property from your settlement. However, if there is no agreement, the starting point is that all property is included.
How is that fair? Well, the mantra under the Family Law Act 1975 (Cth) concerning the division of property of spouses or de facto couples is what is a “just and equitable” property settlement. The steps are:
- Working out the property of the parties. This includes assets, liabilities and resources (irrespective of who owns the property or who owes the liability);
- Determine (on a percentage basis), the contribution made to the property by the parties. These include direct and indirect financial contributions as well as contributions made by each of the parties as parent and homemaker (and may include contributions to assets that are no longer in existence).
- Determine (again on a percentage basis), the future needs of the parties. In this stage of the enquiry, the Court has regard to matters such as the need for one of the parties to care for children, income disparity and health.
- Determine whether overall the adjustment arrived at is a just and equitable property settlement.
With respect to property acquired after separation, an investigation usually needs to occur as to how the property was acquired to then determine how each of the parties have “contributed” to that property. For example, if a party used savings that had accumulated during the relationship to go towards the purchase of a new home, it is possible that the property will be considered in any identification of the “property of the parties” and both parties will be seen to have contributed to the purchase of that property.
Court will usually view inheritances as a specific contribution by the person who received the inheritance, whether it be during the relationship or after separation. However, different weight will be placed on an inheritance depending on when it was received. Therefore, a party who has received an inheritance relatively recently or post separation would be entitled to argue a significant contribution because of that inheritance.
A recent case of Calvin and McTier has considered the treatment of property acquired after separation, in particular the husband received a substantial inheritance four years after the parties separated. At trial level, the trial Magistrate included the inheritance among the assets to be divided between the parties. The Full Court confirmed that the Court has the power to make an order in relation to after-acquired property and there was no error found in the post separation inheritance being in the pool to be divided between the parties. The Full Court was not asked to determine whether the division ordered by the trial Magistrate was “just and equitable” given the recent inheritance from the husband.