We often see clients who ask us about whether the law draws a line in the sand when it comes to property acquired just before or after separation. A common question that arises is whether an inheritance received by one party either prior to or after separation will be included in the asset pool available for division between ex-partners.
In family law, the law looks at the property of the parties as at the current date so if an inheritance (or say a lottery win!) does come in after separation and the parties have not yet had their property settlement finalised, that inheritance will need to be taken into account somehow. That does not mean the other party is automatically entitled to part of the inheritance (although sometimes that can be the case) but it also does not mean the inheritance is completely ignored or “quarantined” from the other property.
Up until the case of Calvin & McTier in 2017, there had been varied approaches in how the Courts have dealt with inheritances. Generally, an inheritance is seen to have been contributed by the person who received it. Inheritances can be considered with the other property or they can be considered separately. If the inheritance is significant and the other party is not receiving a share of it, it may be the case that the other party receives more of the other matrimonial property to recognise that party does not have a significant resource such as the inheritance.
Facts of the case:
Mr Calvin and Ms McTier had been married for eight years and had one child together. Mr Calvin brought significantly more assets into the relationship than Ms McTier, who had nominal assets at the commencement of the relationship. Post-separation, the child spent equal time with his parents. About four years after their separation, Mr Calvin received a substantial inheritance. Ms McTier commenced proceedings to pursue a property settlement claim. The trial judge included the remainder of the inheritance of $430,686 in the net asset pool, which accounted for approximately 32% of the property pool. The trial judge assessed the split as 65/35 in favour of Mr Calvin.
Section 79 of the Family Law Act confers a broad power on the Court to make a property settlement order where it is just and equitable to do so. Mr Calvin appealed on the basis that the inheritance should not have been available for division (not whether the judge erred in the manner in which the assets were divided) and therefore the decision was not “just and equitable”.
The Appeal:
The Full Court of the Family Court rejected the appeal (and ordered Mr Calvin to pay the costs of Ms McTier). The Court held that it was within the wide discretion of the trial judge to include any assets acquired after separation in the net assets to be considered for division. Whether the inheritance was included in the asset pool to be divided or dealt with separately was up to the trial judge to decide, based on the relevant factors, including:
• The length of the marriage;
• Period of time between separation and receipt of the inheritance (in real terms and relative to the length of the marriage);
• Value of the inherited assets relative to the net value of the other assets;
• Nature of the relationship between non-inheriting spouse and the deceased; and
• Any contributions (either direct or indirect) made by the non-inheriting spouse towards the deceased or the inherited property.
Acquiring post separation property is becoming more and more common, particularly when parties separate for a long time or receive inheritances or gifts post separation. This area of family law is complex and you need specialised advice.
Bibliography:
Parker, Anna and Amanda Pearson, ‘Post-Separation Inheritances: Calvin v McTier [2017] FAMCA 125’ (2018) 7 Family Law Review 231
Calvin v McTier [2017] FAMCA 125
