When it comes to dividing up property after a relationship breakdown, most separating couples usually manage to come to an agreement — especially if they’ve follow family law guidelines and obtained good legal advice.
However, there are some problems which often arise and which make the process of property division more difficult. One is where one party has received an inheritance at some time in the past. After separation, they may feel they should be able to keep their inheritance or get their money back if its been spent, rather than it being divided up in the same way as the couple’s other property.
So how do the Family Courts treat inheritances and gifts from family members or friends, where they’ve been given to one person, and the couple has subsequently separated or divorced?
The answer is that it depends on the circumstances. Inheritances and gifts are usually included in the asset pool for division, along with other assets. However the person who received the inheritance is usually entitled by family law to some credit for the contribution. The amount they are entitled to varies. A small inheritance received early in a long relationship may mean little if any credit is given. A large inheritance received late in the relationship may lead to a large credit being given. However the person rarely gets all the money back.
There are exceptions and on occasions the court will exclude or “quarantine” an inheritance or gift from the asset pool. This is sometimes done if it is received late or after separation, it remains intact and unspent, and if there is otherwise adequate property to be fairly distributed between the parties. But even in these cases, it is still likely that the inheritance or gift is taken into account to some extent at the end, when the court makes a final assessment of the financial needs of both parties and makes an adjustment of property on that basis.
It is difficult to provide precise rules. The courts have frequently stated that each case must be judged on its own facts. However past cases give guidance as to what a judge is likely to do in a particular situation.
The situation is different in respect of prospective inheritances; that is where the family member is still alive and hasn’t yet made the gift or bequest. Such prospective inheritances are rarely taken into account, though there are exceptions to this. But it can worry for someone in this situation. .
So inheritances and gifts can be a bit of a minefield in family law disputes. Fortunately the courts will try to do the fair thing. If the individuals themselves understand the situation and try to be fair to each other, they can usually work out a resolution of their issues, even if they may not particularly like the result.