Post Separation Inheritance – Is your ex entitled to part of it?

The Holland’s lived together from 1990 until their separation in July 2007 and divorced in January 2012. They had two children.

In August 2000, the Holland’s purchased a home for $160,000.00. Mr Holland’s grandparents advanced them $31,000.00, which was repaid within three years; when they separated the mortgage on the former matrimonial home was $132,332.09.

Mr Holland commenced his own business around 1992; in 1997 the business was restructured as a partnership, called Holland Trade with the Husband and Wife as joint partners. A joint bank account was opened. The husband undertook the work and the Wife engaged in administration/book work for the business. Following their separation, the Husband re-established his business as a sole trader.

During the relationship the Wife was the primary carer for their children; following their separation in July 2007, the Wife remained in the family home with the children until in or around 2009 with the Husband paying the mortgage repayments.

In early 2009 the husband formed the belief that the Wife had re-partnered and the new partner was spending a significant amount of time in the former matrimonial home.

Since that time, the Wife has been responsible for the mortgage repayments on the home; she renovated the house and let it. The rental income, allowed the Wife to pay the mortgage and other expenses; the Wife is employed casually as a Community Worker.

Additionally, from early 2009 until October 2011, the husband made no child support payments due to his belief that the wife’s then partner was residing in the former matrimonial home.

In October 2011, following assessment by the Child Support Agency the husband has met his child support obligations and had made further payments beyond those required of him to meet additional expenses of the children.]

Some three and a half years after their separation the Husbands brother died leaving a Will; the Husband inherited property with a mortgage of $83,000.00. The Husband’s parents received the Husband’s brother’s superannuation benefits under the Will and paid out the mortgage. Leaving the Husband as sole proprietor of the property.

At the time of trial, the Property had an agreed value of $715,000

The Family Court considered the property to be a financial resource ( an amount of money that a person would have access to post-separation, but not an asset of the relationship). It was therefore excluded from the asset pool, as it had been received post-separation. The asset pool, not including the inheritance, was only $370,000.

The wife appealed, saying that the inherited property should have been included as an asset, and not as a financial resource.

The Full Court of the Family Court allowed the appeal on the basis :

“.. it is wrong as a matter of principle to refer to any existing legal or equitable interests in property of the parties or either of them as ‘excluded’ from, or ‘immune’ from, consideration in applications for orders pursuant to s 79 [of the Family Law Act 1975 (Cth) (‘The Act’)]”.

Essentially, it becomes a question of what contribution the other party may have made to that asset. It is not correct to assume that it will be excluded and, consequently, that the ex-partner will receive no money as a result of that asset being inherited.

in any event, it is the real impact in money terms which is ultimately the critical issue”

In allowing the appeal the Full Court agreed the Court erred in the approach taken to the assessment of contributions which, in turn, derives in part from an erroneous finding that property owned by the husband was a “financial resource” and not as an asset in the property pool; and that it should be excluded from the property as the basis for an assessment of contributions.

Arguably had the property settlement occurred earlier perhaps the above situation might not have arisen.

 

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