What Happens to My Inheritance if My Relationship Breaks Down?

If you and your partner decide to separate or divorce, you will need to work out how your assets are going to be divided. If you received an inheritance during your relationship, it is important to understand how this will impact the division of your assets.

We set out a few key points that might be relevant below.

1. What did you do with the money? 

It is important to consider what you did with the money. Maybe you paid off the mortgage or paid for house renovations, or perhaps you used the inheritance to pay for a family holiday. In each of these cases, the money has been spent on lifestyle or mixed into the asset pool.

Where the money has been spent on assets, it may form part of the joint asset pool to be divided, and your contribution of an inheritance will be recognised by an adjustment in your favour from the total asset pool. You will not necessarily receive your inheritance back dollar for dollar.

Where the money has been spent on a family holiday or lifestyle, it will be a contribution to the welfare of the family, however it may not result in an adjustment in your favour.

If your inheritance has been kept separate from the joint asset pool, the situation may be different. For example, if you gave your inheritance to a stockbroker who invested it all in a share portfolio, and no joint funds were contributed to the portfolio, it will easily be identified as being your inheritance. In this case, it will be easier to argue that the inheritance should sit outside the joint asset pool.

2. How long was the relationship?

If your relationship was short, say less than 5 years, and there were no children involved, you may get greater recognition for the contribution of your inheritance, or you may even get to keep most or all of it. This depends on how the money was used.

Alternatively, if you received an inheritance during a long relationship, it will be given less weight when dividing your assets. The money may be seen as one of many contributions made to the relationship over the years.

3. Is the inheritance a small or large part of the overall asset pool?

Another matter to consider is the size of the inheritance compared to the overall asset pool. For example, if the joint asset pool is $1 million and $600,000 came from an inheritance contributed by the husband to the joint asset pool in the last year of a long marriage, the husband is likely to receive a substantially greater adjustment of the asset pool in his favour than the wife. Whereas if the inheritance was only $50,000 early in the relationship, it is possible that any adjustment would be minimal or non-existent.

At the end of the day, there is no one size fits all approach to inheritance and the facts will vary from case to case.

Speak to one of our expert team today to get advice about your inheritance here.

Note: This is general information advice only and does not constitute specific legal advice. If you would like further information in relation to this matter or other legal matters, please contact us on 03 9620 0088 or email info@resolveconflict.com.au