When a relationship breaks down, it is common for disputes to arise over the ‘ownership’ of an inheritance received by one of the parties.

The biggest question is whether an inheritance received by one party forms part of the pool of assets for distribution between both.

This article provides guidance on when an inheritance might be available for distribution between the parties, the affect the inheritance will have on proportioning the property settlement, and the circumstances when an inheritance may be protected.

How is a property settlement determined?

When assessing the impact of an inheritance, it is helpful to understand the process used to reach a property settlement in family law matters. This includes:

Step 1 – Identifying all assets, liabilities and financial resources of the parties – assets include those held jointly between the parties, jointly with another party, or separately.

Step 2 – Identifying the financial and non-financial contributions made by each party – financial contributions include earnings and assets brought into the relationship (lump sums, property or an inheritance) and non-financial contributions include caring for family, renovating a home, carrying out domestic duties and managing finances.

Step 3 – Assessing additional factors such as each parties’ future needs – their respective earning capacities, state of health, physical and mental capacity and the needs of primary carers to provide a suitable home for children.

Step 4 – In all the circumstances, determining a settlement that is ‘just and equitable’.

The starting point is generally an equal distribution of assets, however the Court’s powers are discretionary in reaching a ‘just and equitable’ outcome and no two cases are alike.

How is an inheritance treated in family law proceedings?

The way in which an inheritance is treated in a property settlement depends upon:

  • when the inheritance is received;
  • the length of the relationship;
  • the amount of the inheritance compared to the overall asset pool; and
  • the unique circumstances of the parties.

The timing of receiving an inheritance is important in determining whether it forms part of the asset pool. The length of the relationship and the parties’ circumstances will influence how the inheritance will be treated.

An inheritance received before or during the relationship forms part of the asset pool. This however does not mean that its value will be equally proportioned between the parties and various factors will be relevant.

The inheritance is considered a financial contribution by the person receiving it, who may be found to have made a greater contribution to the overall assets. This depends however on when the inheritance was received, its value, what it was used for, and the other parties’ financial contributions.

For example, the significance of an inheritance will usually diminish over the course of a long marriage with less effect on the ultimate division of its value between the parties. For instance, after a 20 to 30 year marriage the value of the inheritance may be reduced by other contributions made by the parties and merely form part of the matrix of family finances to be brought into the pool of assets for distribution.

Alternatively, if the relationship is not so long and provided the party receiving the inheritance used it for the benefit of the parties, then the beneficiary of the inheritance may have a greater entitlement to it.

An inheritance received close to the time of separation, or afterwards is generally precluded from the asset pool and not available for distribution. Accordingly, it may more readily be retained by the beneficiary.

The inheritance however may be considered a financial resource of the party receiving it which is potentially available to meet the needs of the other party, after considering the parties’ future needs set out in step 3 above. In such a case, and after considering various other factors, a needy party may obtain a greater division of the net asset pool. This outcome is more likely where the available assets are minimal and it would be ‘just and equitable’ to make the distribution.

The role of the Court and the interplay of the parties’ circumstances

Bonnici and Bonnici [1991] FamCA 86 is a leading family law case regarding an inheritance received late in the relationship. The following extract explains the discretionary nature of the Court when dealing with an inheritance and the circumstances that will be considered:

            ‘The answer…must depend upon the circumstances of individual cases. If…there had been no other assets than the husband’s inheritance, but the wife had…clearly carried the main financial burden in the support of a family and also performed a more substantial role as a homemaker and parent than the husband, then it would clearly be open…to make a property settlement in her favour from such an inheritance.

            A property does not fall into a protected category merely because it is an inheritance. On the other hand, if there are ample funds from which an appropriate property settlement can be made and a just result arrived at, then…a recently acquired inheritance would normally be treated as an entitlement of the party in question.

            The other party cannot be regarded as contributing significantly to an inheritance received very late in the relationship and certainly not after it has terminated, except in very unusual circumstances…’


Inheritances received before or during a relationship must be considered part of the parties’ pool of assets when dividing property post-separation. The proportioning of the value of the inheritance is influenced by various matters, and particularly by the length of the relationship.

An inheritance received post-separation is not available as property for distribution however will be considered a financial resource and, in some circumstances, result in a division of property that favours the party in most need.

Each case is determined on its merits and the Court’s power is discretionary in achieving a ‘just and equitable’ settlement that takes account of all relevant factors.

If you would like to know how an inheritance affects your property settlement, or if you or someone you know wants more information or needs help or advice, please contact us on 03 8346 4900 or email [email protected]