IT'S COMPLICATED: What happens to inherited money when we don't live happily ever after?
IT'S COMPLICATED: What happens to inherited money when we don't live happily ever after? Michael Blann

Inheritance was received after divorce

Hypothetical with Manny Wood.

CHRIS and Mary have been married for eight years and have one child together. Chris and Mary separate and their child spends equal time with each of them.

Four years after separation, Chris receives an inheritance of $500,000 from his late father's estate. By this time the parties had been divorced.

Mary commences action in the Family Court, seeking property orders that Chris' inheritance be included in the matrimonial pool of assets and that she be entitled to a share of the inheritance.

The matrimonial assets also include a house, car, shares and superannuation. The total pool is calculated at $1.3 million.

The court examines the contributions of the parties and notes that Chris made initial contributions in excess of $500,000.

The court found that during the relationship, the contributions were equal and overall, assesses contributions at 75/25 in favour of Chris.

However, the court awarded Mary an additional 10% of the matrimonial pool, based on her future needs and in the light of her relatively low earning capacity. The result being that Chris and Mary's assets were ordered to be divided as to 65% to Chris and 35% to Mary, including the inheritance.

Chris' lawyers argue that the inheritance should not be included, arguing that it was "after acquired” property and had no connection with the marriage.

However, the court finds that inclusion of the inheritance is discretionary and that the court is not obliged to treat it separately.

Chris appeals the decision, arguing that it was erroneous to include his inheritance. However, he did not claim that the ultimate split was not just and equitable.

The Court of Appeal examines the trial magistrate's decision and found that the magistrate was able to exercise a discretion to include the inheritance.

Chris was ultimately unsuccessful and his appeal was dismissed with orders also made that he pay the whole of Mary's substantial legal costs relating to the appeal.

If you would like Manny to address a particular legal issue, send your request to manny.wood@ticli or call 6648 7487.