How Inheritance is Affected When Undergoing a Property Settlement?

The desire to keep most (if not all) of an inheritance is not unusual. You may feel that your ex-spouse does not deserve to benefit from the money your family members earned. However, the issue of inheritance when in dispute, is ultimately decided by the Court if litigated.

As referenced in Bonnici & Bonnici (1992) FLC 92-272, a “property does not fall into a protected category merely because it is an inheritance”.


How is Inheritance Affected in a Property Settlement?

As issues involving inheritance are decided on a case-to-case basis, you will likely require independent legal advice. Opting to work with a property settlement lawyer who understands the nature of these settlements is in your best interest.

Many factors determine how an inheritance is affected in a property settlement. These include, but are not limited to:

  • The timing of the inheritance
  • The amount of the inheritance
  • The size of the couple’s asset pool
  • The intentions of the deceased
  • The size of each spouse’s contribution to the asset pool


How Does the Court Approach the Issue of Inheritance During a Property Settlement?

The court will choose how it approaches inheritance during a property settlement on a case-to-case basis. Typically, there are three models considered. These are,

The Global Approach

The global approach to property settlement combines property owned individually or jointly and is pooled together. The court will then decide each party’s overall contribution to the pool. The recipient of the inheritance will usually get credit for the inheritance, but may not receive the entire inheritance on top of their property settlement.

An Asset-by-Asset Approach

If the court opts to use the asset-by-asset approach, it will look at the parties’ specific contributions to the property. The court will divide the assets between the parties once they have determined each person’s contributions to those specific assets. Should the court decide an inheritance is separate from other assets, the individual who received it will retain sole ownership. However, the court may adjust the remaining property, giving more to the person who did not receive a portion of the inheritance.

A combination of Global and Asset by Asset Approaches

When the global and asset-by-asset approaches combine, the court will examine specific assets apart from the pooled property. Frequently, this approach is applied to cases where the couple were already separated when the inheritance was given.


How the Timing of Receiving an Inheritance Affects Property Settlement


If the inheritance comes before a relationship begins or at the onset, it will most likely be seen as a party’s initial contribution to the relationship. The inheritance is less likely to be separated from the asset pool and given to the party who initially received the inheritance. However, it will be recognised as a more significant contribution when determining the property division. In these scenarios, you may want to consider advice on whether a Binding Financial Agreement is appropriate for you.

During Relationship

If the inheritance comes during a relationship, the use of the funds and the benefactor’s intentions may decide how it is divided. So, suppose an inheritance is put towards something for the family or couple such as a home renovation or a new home. In that case, the court will typically see it as a contribution by the recipient. How inheritances are co-mingled with assets or used as financial resources are also relevant to consider.

At the Time of Separation or Post-Separation

When an inheritance comes near a separation, it is frequently kept separate from the asset pool. However, the court may establish a two-asset pool approach when considering the property pool. An inheritance after separation is typically considered a financial resource belonging to the recipient. However, this may impact the division of the overall asset pool between the parties.


Case Example: Assessing Future Inheritances in Property Settlements,Insights from White & Tulloch v White(1995) FLC 92-640

In the case of White & Tulloch v White, a husband claimed that his estranged wife was expecting a substantial inheritance upon the death of her elderly mother and that this should be a factor when assessing the total asset pool. This case explores whether or not an expected will that someone were to receive could be considered as part of property settlement.

However, the Family Court determined that this could not be considered as “a benefit to the party cannot be so speculative that it is irrelevant to a s 79 determination”. Expectant inheritance could not be seen as a financial resource, as it cannot be certain that she would receive the property under the will as it could be revoked, altered or changed at any time.


How Can I Protect an Inheritance?

If your goal is to keep inherited money from your spouse, several ways can help make this possible.

A Binding Financial Agreement

A financial agreement like this is, when drafted properly and given the required legal advice, can be used as a wealth management tool, to legally binding parties to a particular set of financial arrangements for you and your significant other, in the event your relationship ends. These are binding under the Family Law Act of 1975 and can be set up as prenuptial, post-nuptial, or separation agreements.

Keep a Separate Bank Account

There is a greater chance of preventing your inheritance from being pooled with other assets if you have always maintained it as separate and in your name only. Refrain from depositing joint funds into your separate account with your inheritance in your sole name. Having a separate bank account alone and avoiding the co-mingling of funds is not sufficient protection. A Binding Financial Agreement is the strongest way to safeguard your inheritance. These matters are complex and legal advice should be sought with priority, when considering best practices in protecting your inheritance and future.

Communication is key

Where possible, try to resolve your property matters by consent. You may wish to speak with your former partner first, to speak generally about the proposed property division, but refrain from agreeing to percentages or absolute figures until you have received legal advice. A premature agreement without legal advice, can lead parties to later renege on agreements, leading to mistrust between the parties.  Any agreement reached, should be considered with legal advice before attempting to finalise the matter.


Ending a short-term or a long-term relationship can be complex, and you should prepare to obtain advice as required to protect your personal interests. It is favourable when separating couples can work together, and reach an amicable property settlement through a dispute resolution process. However, when this is not possible, the separating party may find themselves before the family court, where a property settlement can be made.

Regardless of which way your case goes, the experience will be smoother if you seek legal counsel. Feel free to contact the team at My Legal Crunch for expert assistance navigating the processes involved in property settlement. You can feel confident in choosing My Legal Crunch to assist you.

Our team has years of experience helping clients receive fair treatment when their relationship ends. Our lawyers know how to guide you through the unfamiliar territory of divorce and property settlement. Additionally, they will do all they can to ensure you get the best outcome.