Inheritance and divorce are related terms as inheritance by a spouse during marriage is different from the money that comes in marriage. The earnings or income of a spouse during a marriage is the income of both spouses altogether. However, with inheritances, there will be factors involving entitlement to part of the money.
Marital property is what we call a property that is jointly owned by a couple, while Separate property is owned by one of the spouses, and will not be subjected to division during a divorce. Most assets that are acquired by either spouse during the marriage are automatically considered marital property.
Like with all laws, it will vary by state. Some states are hesitant to recognise separate property in several situations. If one is married and expecting an inheritance and they want to keep it separate, it’s important to have general knowledge about inheritance and divorce and the other factors that come with it.
Settlements In Inheritance And Divorce
Obtaining an inheritance during or after marriage or a de facto relationship is quite common for people. An inheritance is usually viewed as property and it cannot be excluded from Family Law settlements. Sure, every case varies and the manner in which an inheritance is relevant will depend on individual situations. Here are relevant issues:
1. When was the inheritance obtained?
When we’re talking about inheritance and divorce and the bequest was particularly obtained after separation, it can be quarantined. This means that the inheritance can be kept from being touched or be subjected into further legal procedures. However, it can still be relevant to other issues which can affect property settlements.
Additionally, if the inheritance was obtained early on in a long relationship, less weight may be placed on it. This is sometimes dependent on the amount of the inheritance and how it was applied.
2. Was the inheritance left for both or only one of the couple?
A testator is a person who makes a valid will. Usually, a testator will offer a property to a party as opposed to the inheritance being expressly made for the couple. In the former situation, the person who received the inheritance can affirm that the inheritance is part of their financial contribution to the family.
Sometimes it can also be argued that the inheritance was meant for both of them where the couple has assisted the testator. The expectation of inheritance can also be relevant in Family Law and will depend on the wording of the will and the overall condition of the testator. Family Law court procedures might even be adjourned until interest in an estate has been vested.
Commingling
A critical factor that can come up with inheritance and divorce is commingling. Commingling is the act of mixing funds belonging to one party with those of another party. Separate property can turn into marital property if it is commingled with marital property.
For example, if one is left with an inheritance and has put in a separate bank account under a spouse’s name, it will still be considered a separate property. However, if the inheritance money is put into a joint bank account and used for household expenses for the couple, then it may be considered commingled.
Marital property that is deposited in a separate property account can also alter the characterisation of the separate property into marital property. Separate property can easily become marital property, but it does not work the other way around. Separate property that is commingled with marital property then becomes marital property.
The Spouse’s Entitlement To Inheritance
If one is the inheriting spouse in a relationship, their inheritance is not in a protected class of assets that will be automatically quarantined from the property pool when they separate or get a divorce from their partner. Now, what can one do to protect themselves while being in a case of inheritance and divorce?
If one is still with their spouse, it is best to apply for a financial agreement for their protection. Financial agreements can be made before or during a de facto relationship by Australian standards. This can be drafted to quarantine an inheritance so that all other assets built up during a relationship are not subjected to the agreement.
Now, what if the couple has separated while dealing with inheritance and divorce? The Federal Circuit and Family Court Of Australia has a wide array of alternatives for treating inheritances. The court can do either of the following:
1. Quarantining the inheritance
The spouse who received the inheritance will retain it and other assets that belong to the parties would then be divided in accordance with the parties’ contributions and their needs in the future.
2. Including the inheritance to be divided between the spouses
The court will consider the inheritance a contribution made by the other party who received the inheritance, but will not reimburse that spouse’s amount of the inheritance. The inheriting spouse may simply receive a larger percentage of the pool to reflect their contribution to the inheritance.
It is worth noting that the property pool does not form at separation and the court can adjust to either approach even if the inheritance is received after separation. Initially, the approach is generally only adopted where an inheritance is received shortly before or after separation. The second approach is more likely to be used because the inheritance is seen to be worn down by contributions made by the other party over the time frame.
Seeking Legal Advice About Inheritance and Divorce
Finalising your settlements during inheritance and divorce altogether in a legally binding way is important after the separation. In cases where the inheritance is received post-separation and included in the property pool between spouses, the receiving spouse gets credit for contribution.
If they had finalised their financial matters at an earlier time, they may have been able to keep the inheritance all to themselves. That’s why having legal advice from JB Solicitors and our team of family and property lawyers can greatly aid you in cases related to inheritance and divorce. We offer fixed-fee prices to ease the financial worries of our clients and give them a clear sense of the cost of our services.
Contact JB Solicitors today
