Effect of a future inheritance on a family law property settlement
People negotiating a property settlement on relationship breakdown sometimes feel that they should take a larger proportion of the settlement because their former partner is likely to come into money through an inheritance. This is certainly a reasonable-sounding argument. If the future needs and resources of the parties are relevant in the assessment of a property settlement split at all (and they most certainly are) then surely such a windfall that really does solve all of the financial issues in a separation, but for only one partner—should be factored in somehow. But the real answer is—most probably not.
The case of White & Tulloch v White[1] laid down guidelines about the treatment of future inheritances within the context of family law property proceedings, and these guidelines have been followed in subsequent Australian cases. The Full Court was clear that an expected inheritance will not be relevant in very many property settlement cases at all.
This is because a person’s Will is only ever an expression of future intent while the will-maker is still alive. To state the obvious, the Will does not take effect until the will-maker dies. In the time between making a Will and the time of death, the will-maker could change their mind and draw up a new Will, with changes to the beneficiary arrangements, any number of times. It is a fact that people often change their Will on their deathbed. Alternatively, a Will could be invalid and unenforceable. Or a Will might even be successfully challenged, after the death, by other relatives or people who feel they should have been provided for. Therefore, the fact that a person is mentioned in a Will is no guarantee at all of inheritance at a future date, even if it seems unlikely to everyone at any particular time that the will-maker would ever change their mind.
There have been some exceptional cases that might encourage a court looking at particular facts to consider taking a future inheritance into account when determining a property split, but none of these is definitive or should be considered in isolation. One consideration is where the will- maker no longer has legal capacity to change a Will in which a party to a family law property case is already named as a beneficiary. This may be the case, for example, if the will-maker is in the later stages of Alzheimer’s disease and cannot express altered will-making intentions. Another possibly relevant consideration is when the death of the testator is very near–as opposed to the will-maker just being elderly and frail. The expectation of a beneficiary receiving inherited assets in the very near future might be deemed, in a particular cases, to be sufficiently certain for the inheritances to be taken into account.
It should be noted that this reluctance to factor-in inheritances applies only to future inheritances, that is, to inheritances that are expected after the property settlement. Inheritances received before the relationship commenced and at least partially brought in, or during the relationship, or even after separation but before an enforceable, formal property settlement is concluded, are dealt with quite differently under the law. Here, the inheritance will likely be factored (in some way, but depending on the timing and other circumstances) in the property split. To be clear, this is because, in these circumstances, the inheritance is fact, a certain financial resource and no mere expectation.
So, as a rule of thumb, Australian family courts do not take into account future, expected inheritances when determining property settlements. As with all rules of thumb, there are exceptions, but not ones that occur very often or can be relied upon. There is usually no getting around the possibility that a Will might be changed by a living will-maker.
[1] 1995 (FLC 92-640)