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The Role of Inheritance in Property Settlements

In family court property matters, the receipt of inheritance by a party is often a consideration in the overall determination as to what a party might receive in a property settlement. Generally speaking, a receipt of inheritance by a party during the relationship is considered a financial contribution by them to the formation of the asset pool.

• When the inheritance was received: If the inheritance was received at the outset of a 40 year relationship, the contribution will likely be deemed to have “eroded” over the term of the relationship. Conversely, if the inheritance arrives in or around the time of separation, it is quite likely that the court will consider the inheritance to be a significant contribution by the party who receives it, for which they will be given substantial credit.
• The size of the inheritance: The inheritance might be so large that, no matter when received, it cannot be ignored as a contribution. For instance if one party receives an inheritance of 5 million dollars at the start of a long term relationship (and thus allows the parties to purchase a house, etc) it will have a huge impact on the asset pool that will likely never be significantly eroded. In the opposite scenario, the receipt of a small inheritance may have a minimal impact on the contributions factors for property division.
• Does a party have an expected inheritance interest: The old maxim in family law is that “expected” inheritances are not taken into consideration by the family court in their factoring of respective interests in property settlements. The reason for this is simple – people are leading long lives and anyone can change their will at any time. Simply put, very few people have a guarantee of receiving an inheritance; they only have an expectation of receiving an inheritance. Recent case law, on rare occasions, has seen courts recognise for the purposes of asset division the fact that a party stands to inherit money in the future. Amongst the issues that the court factors in when considering an expected inheritance by a party:
o When will the inheritance happen? – is the person leaving the inheritance very sick or near death? Unless that person is more likely than not to die in the near future, then the less likely it is that the court will recognise an inheritance expected at some point in the future.
o Is the Will of the person leaving the inheritance set in stone? – if that person makes a Will and then becomes ill or loses capacity such that they are unable to change their Will, then the inheritance of their heirs may be reasonably assured, such that the Court would be prepared to take it into account.
o Have both the parties to the marriage contributed to the asset to be inherited? For example, if the husband’s elderly parent has been ill for a long time and the husband’s wife has been that parent’s long term primary carer, then there may be an argument that the expected inheritance should be taken into account, given the wife’s contribution.
o Does the asset pool lack sufficient assets to compensate the non-inheriting party without considering the expected inheritance? If so, there is a possibility that the court will take the expected inheritance into consideration to ensure a fair result.

If you have questions about inheritance, property settlement or family law in general, please contact our Family Law team.