If one party has an expectation of a significant inheritance, the other party may argue that this should be taken into account by the court in a property claim.
Factors the Court considers in determining a property claim
The Court’s approach in determining any adjustment to the parties property is as follows:
- Identify the property pool including all existing legal and equitable interests of the parties;
- Evaluate whether it is just and equitable to make any order adjusting those interests;
- Consider the contributions of the parties to the acquisition, maintenance and conservation of the property pool (section 79(4) factors);
- Consider the future needs factors of the parties (section 75(2) factors).
- Determine whether the order is just & equitable having regard to the above factors (not just the proportional split but the terms of the orders too).
The contributions assessment will have regard to the financial, non-financial, parenting and homemaking contributions of each party to the marriage.
Once that assessment is made, the court then turns to the future needs factors including:
- health;
- caring responsibility for children;
- income earning capacity;
- age;
- financial resources;
- superannuation;
- general provision under section 75(2)(o) which allows the court to consider any other matter that is relevant.
It is the ‘any other matter’ provision that is of relevance in determining how a court deals with a prospective inheritance.
What is a prospective inheritance
A prospective inheritance is merely an expectation of receiving an asset at some point in the future, given that there can be no assurance that the testator will not change his/her will. Having regard to this, the courts do not include a prospective inheritance as part of the property pool, but may consider it either as a financial resource (under section 75(2)(b)) or generally as ‘any other matter that is relevant’ (under section 75(2)(o)).
It may also be relevant for the purpose of whether an adjournment of the matter is permitted until after the inheritance is received including under section 79(2) and as to whether it is just and equitable to make the order, and under section 79(5) which enables the court to adjourn proceedings if there is likely to be a significant change in the financial circumstances of the parties to the marriage or either of them.
While there is no hard and fast rule as to how the Court ought to treat prospective inheritances, the courts have approached the issue by taking into account:
- the size of the inheritance;
- the likelihood of the inheritance being received;
- the time at which the inheritance is likely to be received.
The most well known case in relation to the issue of an expectation of an inheritance is White & Tulloch v White.
White & Tulloch v White (1995) 19 Fam LR 696
In White & Tulloch v White, the Wife’s mother was 81 years old, widowed, in reasonable health and had two children. The Husband was allowed to proceed with a subpoena seeking the production of her will but not documents detailing her financial position.
The Full Court rejected the proposition that a prospective inheritance is a financial resource, saying:
“We do not consider there is any absolute rule. The ultimate criterion is whether the evidence is, or may be, relevant to the just and equitable process under section 79. An expectancy of inheritance will not be relevant in many s79 proceedings. In the end, relevance must depend upon the nature of the claims being put forward and the facts of the particular case.
For example, if the claims were based entirely upon contributions, it could not be suggested that an issue of expectancy could be relevant because no section 75(2) factors would be involved. Where the claim includes section 75(2) factors, the nature or degree of suggested relevance between those specific claims and the expectancy question would need to be analysed. That is to say, there must be a worthwhile connection between a specific element of the party’s case and the suggested expectancy.”
In that case, the court made the following further observations:
- Where the testator had already made a will favourable to the party but no longer had testamentary capacity and there was evidence of his/her likely impending death in circumstances where there may be a significant estate, and where there is a connection to 75(2) factors, the prospective inheritance would be relevant;
- the simple assertion that one party has an elderly relative who has property and is or is likely to benefit from that property, is a speculative assertion and has no relevance.
The case proceeded on the basis that she had significant property and the probabilities may suggest that that would continue to be the case, although it might be diminished by medical care, donations and the like.
The guidelines set out by the court in this case were however expanded upon in the case of De Angelis.
De Angelis & De Angelis [1999] FamCA 1609
In De Angelis, the Wife in the matter was expected to receive an inheritance from her mother and her aunt, two properties with a total value of $500,000. The matrimonial property was valued at $560,000. The Wife’s aunt was 90 and had suffered from dementia and therefore lacked the capacity to alter or revoke her existing will.
The Full Court in this case reiterated that there is no absolute rule in relation to prospective inheritances and that the court has a wide discretion under section 79 of the Family Law Act.
The Court found that it would have been unjust and inequitable to the husband if the court did not take into account the wife’s anticipated inheritances in determining a property settlement claim.
The court took into consideration that the aunt lacked capacity and it was very unlikely she was going to change/revoke her will and therefore the wife was likely to receive the inheritance under her aunt’s will.
In coming to their conclusion that the inheritance should be taken into account, the Court said “in what could well be a very short period of time (given the ages of her aunt and mother) the wife could well be the owner of two properties having a combined value of almost the same amount as the value of the parties property currently available for distribution, and particularly in circumstances where the husband had been found to have done substantial improvement and maintenance work on both properties.”
The Full court went on to state “we consider that it would have been unjust to the husband to ignore this matter been if it was categories only as a possibility and not a probability.”
Other interesting cases
- C v M (30 August 2000): The Court took (reluctantly) took account of the prospective inheritance of the Wife of her mother’s property where the Wife was due to inherit her mother’s property, her mother was aged 90 years and had lost testamentary capacity and the wife was the sole beneficiary of her mother’s estate in her will;
- MacDowell & Williams [2012] FamCA 479: A subpoena was set aside for production of testamentary documents of the Wife’s parents who were 75 and 77. They deposed to being in good health and possessing full testamentary capacity. The husband’s evidence was that the Wife would inherit a proportion of her parents estate worth over $20M. The Wife’s parents were still working in their investment business. The Court said that there is no reason to suppose that the wife was likely to receive any inheritance in the near future and any testamentary directions of the Wife’s parents could change prior to their death.
Timing of an inheritance
Where the court is satisfied that an inheritance is likely and the size of the inheritance would warrant an adjustment of property interests of the parties, the court will need to consider when the inheritance is likely to be received. For example, if the testator has made provision for one of the parties, and they are faced with imminent death or rapidly deteriorating health, the Court may adjourn the matter until the testator has died and the actual inheritance has been identified (section 79(5)(a). This occurred In the Marriage Grace (1997) 22 Fam LR 442 where the Wife sought an adjournment until the husband’s interest in a family trust vested or his mother died. The Judge refused but on appeal the Court allowed an adjournment period of 2.5 years. In Rogan v Rogan [2007] FMCAfam 1044. the Court noted that an adjournment would probably crystalise the prospective inheritance and arguably make quantifcation of the section 75(2) factors easier.
Summary
The Court will not immediately consider prospective inheritances as relevant factors in making property adjustments. Rather, the court will examine the facts of each individual case and determine whether or not the inheritance presents sufficient grounds to be considered relevant in the making of property adjustment orders.
Inheritances are more likely to be considered relevant to the determination of what orders with respect to the division of property are considered just and equitable by a court in circumstances where the inheritance is a certainty/probability, it is imminent and the inheritance is of significance when compared to the property pool.
