Should I Separate Before my Rich Parent Dies to Preserve my Inheritance?

12 April 2018

If your marriage or relationship is on the rocks and you are agonising as to whether to separate from your spouse or partner, then here is some advice which may spur you on to make a decision one way or the other.

Under the Family Law Act, a Court is required to take into account all assets and entitlements in existence at the time it is asked to make a decision.  When it comes to an inheritance, here are the possible scenarios:

  1. Your rich parents are alive and well

The fact that your parents are rich, and that upon their death you may stand to inherit millions, makes no difference to the outcome of your Family Law settlement.  This is not a factor which a Court can take into account as whilst the inheritance may be a future entitlement, it is by no means a certainty.  Examples:

  • You may die before your parents
  • Your parents may have spent all their money by the time you die
  • Your parents may change their will to exclude you
  1. Your rich parent is not well and is likely to die in the short term

Generally, if you stand to inherit a large sum and you have not separated, then any inheritance received will form part of the pool of assets available for division between you and your spouse in the event of a future separation.  Despite the moral beliefs of some people, such an inheritance is not quarantined.  Whilst one can argue that the other spouse should not receive much of a share of that inheritance, there is no blanket rule of law to cover the situation.  A court is required to consider all of the circumstances.  Each case is different and must be decided on its own particular facts.

There will be some instances where the other spouse may be able to argue that the inheritance should rightly be for the benefit of both spouses.  For example, if your spouse cared for your incapacitated parent for many years prior to the death, then the Court would consider that this was a substantial contribution towards the inheritance received and that inheritance should just form part of the overall pool of assets to be divided between spouses in any Family Law Property Settlement.

However, sometimes it may be possible to adopt a strategy to maximise the benefit you stand to gain from an inheritance.  For example:

If you act quickly and legally formalise a Family Law property settlement with your spouse or partner before the parent dies, then the inheritance does not form part of the assets to be divided.  If your parent dies after the Family Law property settlement is finalised, the subsequent inheritance received is yours!

However, this strategy also works in reverse.  For example:

If you are not the one receiving the inheritance, then if you continue the marriage/relationship until after the spouse’s rich parent dies, and the inheritance is received, then, subject to arguments as to contribution, the inheritance would need to be considered to form part of the pool of assets and you may receive a greater share of the assets than you would have got had you separated and agreed on a property settlement before the spouse’s rich parent died.

If you would like legal advice on your specific situation, please call Melbourne Family Lawyers on +613 9670 9677 or click on the blue Make an Enquiry button on the top right of this page.

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