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COMPASSIONATE FAMILY LAW EXPERTS

Inheritance / Gifts

Inheritance / Gifts

Inheritance

The Family Court deals with inheritances in the same manner as it does with all contributions to the property of the parties to the relationship. How the Court deals with inheritances when considering what property settlement to make depends on a number of factors including:

  • Was it intended that the inheritance would benefit one or both parties to the relationship?
  • Was the inheritance received earlier in the relationship or towards the end or after separation?
  • What contribution did the party who seeks to benefit from the inheritance make to the property of the testator that may have influenced the inheritance being left to the other party?

In some cases, the Courts, when determining whether an adjustment ought to be made under Section 75(2)(o)[1], have quarantined the inheritance from the asset pool of the parties and considered the inheritance as a financial resource to the receiving party.

There are a number of cases dealing with inheritance, a typical case is that of Elgabri and Elgabri [2009] FamCA 227 which involved a 25 year marriage with the husband receiving substantial sum by way of inheritance later in the marriage. The trial judge found in all other respect the contribution of both parties as being equal but made an adjustment of 7.5% in favour of the wife due to the benefits the husband would receive through his inheritance.

It is generally the case that parents would like to make provision in their wills to leave their bounty to their children while at the same time protecting that bounty from their children’s spouses in the event of a breakup of the marriage. Relying on the outcomes of Family Law proceedings to achieve that objective may not be the desired outcome.

One means of quarantining inherited property is to have a financial agreement which specifically states that any inheritance received by other party during the marriage will upon separation be retained by the party who received that inheritance.

Another issue that arises is what to do with an expectation of inheritance. In the majority of cases, expectancy of inheritance will not be relevant in Family Law proceedings unless:

  • the testator is at an old age and/or in poor health; and
  • there is relevant connection between contributions of a party to the testator’s assets.

In White and Tulloch v White [1995] FLC92-640, the wife’s mother was 81 years old, widowed in reasonable health and had two children. The husband had issued a subpoena to the mother to produce her will. The Court approved the issue of the subpoena.

Similarly in Rogan v Rogan [2007] FMCA FAM 333, the Court allowed the wife to issue a subpoena to the husband’s mother who was 94 in need of constant care and with the real estate compromising part of her estate worth at least $3 million. The trial judge having considered whether the material sought in the subpoena was sufficiently likely to add to relevant evidence concluded that it did and allowed inspection of documents produced by the mother under subpoena.

Gifts

When determining the nature of a gift, that is whether it is intended to benefit both parties or one party, the Court looks at the actual intention of the donor as being the critical issue. By way of example, if title to realty property is transferred to one or both parties, the Court would readily find the intention of the donor to be in accordance with the ownership recorded on the transfer of title to the property (see Gosper [1987] 11 FamLR 601).

This does not mean that a party intended by a donor as recipient would necessarily receive full credit for the present value of a gift or a gifted asset. The weight the Court affords to the gift depends on a number of factors including the use made of the gift to the overall property pool.

Where a gift is made to both parties, it remains open to the court to regard the gift as a contribution made on behalf of the party to whom the donor is related in appropriate circumstances. If, however, evidence suggests that the donor intended to benefit both parties, the gift is regarded as a contribution made on behalf of both parties.

[1] For explanation of Section 75(2) factors, see further on in this Glossary.