Inheritance & Property Settlements: Protecting Your Assets with Victorian Family Law

Dealing with the breakdown of a significant relationship is rarely easy. It is an emotional time, often compounded by significant financial anxiety. One of the most sensitive and frequently asked questions we encounter relates to money or assets passed down from parents or relatives: “Will my ex-partner get half of my inheritance?”

An inheritance is often more than just a financial asset; it represents a family legacy, the hard work of loved ones, and future security for yourself and your children. The thought of it being divided in a property settlement can be distressing.

While many people assume that an inheritance received by one person remains theirs alone, Australian Family Law is complex. Under the Family Law Act 1975, an inheritance is not automatically “quarantined” or excluded from the asset pool. However, it also does not mean it is automatically split 50/50.

The outcome depends entirely on the specific circumstances of your relationship and when the inheritance was received.

How Separation Lawyers View Inheritances in the Asset Pool

When separating couples cannot agree on how to divide their property, the matter may proceed to the Federal Circuit and Family Court of Australia (FCFCOA). The Court uses a structured process to determine a just and equitable division of assets.

Generally, any property owned by either party, whether jointly or individually, is considered part of the total asset pool available for division. This includes inheritances. However, experienced separation lawyers know that the crucial factor is not just that you received an inheritance, but when you received it and what happened to it afterward.

• Early in the Relationship: If an inheritance was received early in a long marriage and was used for joint purposes, such as paying off the mortgage on the family home or funding family holidays, its impact on contributions is likely to be lessened over time. Over time, the distinct ownership of that inheritance blurs into the overall family economy.
• Late in the Relationship: Conversely, if an inheritance was received very late in the relationship, or after separation has occurred, the Court is more likely to view it differently. While it may still be included in the asset pool, it will usually be acknowledged as a significant financial contribution made solely by the beneficiary.

The Expected Inheritance Myth and Future Entitlements

A common concern for those undergoing a property settlement in Melbourne is whether an expected future inheritance will be included. Perhaps you have elderly parents with significant assets; you may wonder if your ex-partner is entitled to a share of that future wealth.

Generally speaking, the answer is no. A potential future inheritance is usually considered a mere expectancy by the Court. It is not an asset you currently own, and therefore, it is not typically included in the divisible pool. Your parents could change their Will, or the assets could be depleted before they pass away.

However, in some circumstances, a substantial and imminent inheritance might be considered a financial resource for one party. While it will not be divided, the Court may adjust the percentage split of the current asset pool in favour of the other party, knowing that the beneficiary has significant future financial security guaranteed.

Why Proactive Advice from Family Law Experts in Melbourne Matters

Because the Court has wide discretion in these matters, relying on guesswork can be financially disastrous. The treatment of inheritances is highly fact-specific and requires the eye of family law experts who understand the nuances of the Australian family law legal landscape.

If you are concerned about protecting a significant inheritance, whether one you have already received or one you expect to receive in the future, the most effective tool available is a Binding Financial Agreement (BFA).

Often referred to as a pre-nup or a cohabitation agreement, a BFA can be entered into at any stage of a relationship. It allows you to opt out of the standard Court process and decide in advance how specific assets will be dealt with if the relationship ends. For a BFA to be legally binding, both parties must receive independent legal advice before signing.

Navigating Your Property Settlement with Confidence

The intersection of grief, family legacy, and relationship breakdown is incredibly difficult to navigate. You need to know where you stand legally so you can make informed decisions about your financial future and ensure your family's hard-earned legacy remains protected.

If you have received an inheritance and are facing separation, or if you want to proactively protect future assets, do not wait until matters escalate. Understanding how the Federal Circuit and Family Court of Australia approaches these complex contributions is vital to achieving a fair outcome.

At Kelly & McHale Family Lawyers, we combine specialist legal expertise with a compassionate approach. We can help you assess your unique situation and develop a strategy to protect what matters most to you.