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Separation and Inheritance

The breakdown of a relationship is usually an emotional and often distressing time in your life. You still have careers to pursue, kids to raise and your personal health to maintain, all whilst your world appears to be falling apart.  

Trying to sort out property settlements, parenting arrangements and maintenance issues can seem to be an impossible task. 

After separation, many couples do not make the sorting out of their property arrangements a priority. 

As a result, years can sometimes pass before an attempt is made to finalise these matters.  

It is important to note that when your property settlement is being finalised the value of the asset pool will not be the values at the date of separation.  

It may be that 2 or 3 years have passed since you separated. The pool to be divided will include any new assets that either of you have acquired or created since separation. 

You may feel that the creation of a new asset (e.g. a business you started on your own) should be excluded from the pool because you feel solely responsible for its success. This may not be the case.  

The pool will also include any increase in the value of property from the date of separation to the date of settlement. You need to be aware of this fact. It may be prudent to act quickly to sort out these issues. 

An inheritance received by either party after separation and before finalisation of property issues can prove interesting. These gifts are often from a deceased parent and the recipient usually is very reluctant to share.  

An interesting case that demonstrated the importance of timely sorting out property issues was Calvin v McTier.  

The parties had been married for 8 years. Four years after the separation, the husband received a substantial inheritance from his father’s estate.  

At the time that the inheritance was received there was no agreement about the division of assets between them. 

The husband had contributed substantial assets at the commencement of the relationships. 

Following the receipt of the inheritance, the wife commenced proceedings in the court for a property settlement.  

The husbands claim was that the inheritance should not be included in the property pool. He claimed that there was not a sufficient “connection” between the inheritance from his father’s estate and the matrimonial relationship.  

The court has a discretion as to how to approach the treatment of property acquired after separation. It could include an inheritance in the asset pool or deal with it separately.  

In this case, the initial decision of the court was to include the inheritance amongst the assets to be divided. This decision was upheld on appeal to the Full Court of the Family Court of Australia.  

If the property settlement was finalised prior to the receipt of the inheritance, the husband would have received the sole benefit of it. 

The message here is that it may be wiser to attend to the sorting of property issues sooner rather than later. This will allow you to move on with your life knowing that any wealth you create is yours.   


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