Can My Ex-Spouse Claim My Inheritance?

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28/02/2024

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When a couple separates, the division of assets is determined at the time of the property settlement. In cases where separation has occurred, but the property settlement has not yet taken place the issue of inheritance can arise. This may leave people wondering if their ex-spouse can claim their inheritance. Here’s what you need to know.

What does the court say about an ex-spouse claiming my inheritance?

A person’s inheritance will usually only form part of the asset pool if the party was bequeathed the inheritance prior to the settlement taking place. However, that does not mean the ex-spouse is guaranteed a portion of the inheritance.

In circumstances where settlement has not yet occurred, the court will assess a range of factors to determine whether the ex-spouse is entitled to any of the inheritance. This includes:

  • timing;
  • size of the asset pool;
  • the benefactor’s relationship with each of the spouses; and
  • the intentions of the benefactor.

If the inheritance has already been received (i.e. before or during the relationship) then the inheritance will usually form part of the asset pool. The court will consider how the inheritance was used, for example, did it contribute to the family home or other joint assets or did the beneficiary spend it themselves? If the inheritance was received toward the end of the relationship or after the couple separated, then the ex-spouse may have difficulty in claiming the inheritance and the court may exclude the inheritance from the property pool.

The size of the total asset pool before and after factoring in the inheritance will be considered by the Court. If the inheritance is larger than the asset pool, then it may be included to ensure both parties receive a fair property settlement.

Another consideration made by the Court will be the relationship between the benefactor and both of the spouses, but more specifically the relationship between the benefactor and the ex who is making a claim on the inheritance.

The inheritance may be included if their relationship was generally good or if the benefactor had, for example, lived with the couple and was cared for by the ex-spouse who is making the claim. If this can be ascertained, then the inheritance may be included in the total asset pool for property settlement.

In addition to the relationship between the benefactor and the ex-spouse, the intentions of the benefactor will be considered by the Court. If it is likely that the benefactor intended for the inheritance to be used by the couple as a whole, for example to make improvements on their property or to purchase a family home, then the inheritance may be included in the total asset pool.

If the inheritance is included in the property pool, the Court may make a finding that the spouse who inherited the funds made greater contributions and make an adjustment to that spouse. If the inheritance is excluded from the pool, then this may still be considered a financial resource of the spouse who inherited the funds and factored into the future needs adjustment made by the Court.

Is there a way of safeguarding assets against a claim from a former spouse?

Having a Binding Financial Agreement (BFA) in place can help to safeguard your assets against a claim by a former spouse. A BFA is a document which allows both parties to the relationship to set out the terms of any future financial settlement in case of separation or divorce.

Both parties can agree on the terms they choose – for example, a couple who has joint assets may choose to split everything 50/50, whereas a spouse who owned a property before meeting their partner may want to protect the assets they came into the relationship with. A BFA can cover houses, units or land, superannuation, savings, homewares or any other physical assets the couple wishes to include in it and feels they would have to deal with if they were to separate.

If a BFA does not exist at the time of separation and one of the spouses has previously received or will be receiving an inheritance, the court can make an order which will determine how to split all of the assets, including the inheritance in question. Where a consent order differs to a BFA is that it must be made in fairness and have just terms, it must also be agreed to by both parties and can only occur after separation unlike a BFA which simply has to contain the terms agreed to by the parties at the time of execution.

For a BFA to be legally binding, both parties must seek independent legal advice. If you would like assistance in planning for your financial future with a spouse and want a BFA to form part of your planning, our family lawyers in Cairns can assist.

The only way to protect your interests is to finalise your property settlement in a way that is legally binding and recognised by the Court (BFA or consent order) soon after your separation.

 

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