Updated 30 October 2026
CM Law's Ultimate 50 List - Separated Couples FAQ #26: How to deal with inheritance during separation?
Is an inheritance included in a property settlement?
An inheritance you have received can be considered in a property settlement, even if it remains in your name or arrived after separation. It is not automatically divided equally or automatically protected. The outcome depends on the property, both parties’ contributions, their current and future circumstances, and what is just and equitable.
For separating spouses and eligible de facto couples in NSW, the Family Law Act 1975 governs property settlement. Contested proceedings ordinarily go to the Federal Circuit and Family Court of Australia. Inherited money, land or shares are not generally reclassified as merely a financial resource because they came from a relative.
- Tell your solicitor when the inheritance arose and what you received.
- Preserve documents showing its value and subsequent use.
- Obtain advice before agreeing to exclude or divide it.
Does it matter when you received the inheritance?
Timing matters to the assessment of contributions, but it does not create an automatic exemption. An inheritance received before the relationship, during it, or after separation may need consideration. The court examines the actual circumstances, including how the inheritance was used and what property exists when the case is decided.
| When received |
What needs assessment |
Records to retain |
| Before the relationship |
Its value at the start and how it contributed to property or family life over time. |
Estate records, opening balances and asset purchase documents. |
| During the relationship |
The inherited contribution alongside both parties’ other contributions and circumstances. |
Distribution statements, mortgage payments, purchase records and valuations. |
| After separation, before final settlement |
It is not automatically excluded. Its timing and both parties’ circumstances remain relevant. |
Dates of entitlement and receipt, executor correspondence and current asset values. |
Legal Aid NSW explains that considering all property does not mean every asset must be divided. The assessment must first address contributions and current and future circumstances.
Will a separate bank account protect your inheritance?
Keeping inherited funds in a separate account can help prove their source and trace what happened to them. It does not place the money outside family law. Equally, using an inheritance for the family home does not automatically erase the recipient’s contribution or guarantee repayment of the original amount.
Keep statements showing the estate payment, transfers, purchases and mortgage reductions. If inherited funds bought an investment, retain purchase documents and current valuation evidence. These records help distinguish the original contribution from later changes in value and other contributions.
Do not transfer assets to relatives, conceal accounts or arrange artificial delays to defeat a claim. Seek advice before gifting, spending or restructuring inherited assets while a settlement is being negotiated.
What if the inheritance is expected or has not been paid?
A hoped-for inheritance from a living relative is different from an existing entitlement in a deceased estate. A future gift under a changeable will is usually too uncertain to rely on, although unusual circumstances can make it relevant. An estate interest may require disclosure even before money reaches your account.
The judgment in Joris & Joris [2025] FedCFamC2F 317 discusses the difference between speculation and sufficiently concrete evidence of a prospective inheritance. It concerned access to a will, not an order dividing an inheritance, and predates the June 2025 property reforms.
If the person has died, give your lawyer the will, probate documents and executor correspondence you hold. Estate debts, conditions, disputes and administration delays can affect the nature and value of your interest. Do not assume that an undistributed entitlement is irrelevant.
How does the court assess an inheritance under current law?
The court identifies existing property rights and liabilities, assesses contributions, and considers current and future circumstances. It must be satisfied that any property adjustment is just and equitable. An inheritance is considered within this wider assessment; there is no fixed percentage that a former partner automatically receives.
The property reforms commencing on 10 June 2025 clarified this framework. Relevant considerations can include:
- The inheritance’s size, timing and use, alongside other financial contributions.
- Homemaking, parenting and other non-financial contributions.
- Each person’s age, health, income, resources and earning capacity.
- Responsibility for children, including their housing needs.
- Where relevant, family violence’s effect on contributions and its economic effect on current and future circumstances.
An inheritance may be significant without deciding the entire outcome. A solicitor must assess the relationship and finances as a whole.
What does Calvin & McTier show about inheritance after separation?
Calvin & McTier confirms that receiving an inheritance after separation does not automatically put it beyond the court’s property powers. The appeal concerned inherited assets received nearly four years after separation. The court upheld their inclusion in the settlement, while recognising that deciding how to deal with such property involves discretion.
In Calvin & McTier [2017] FamCAFC 125, the husband inherited from his father. He challenged the trial magistrate’s inclusion of the remaining inherited assets, arguing that the inheritance lacked a sufficient connection with the marriage.
The Full Court dismissed the appeal. Its reasoning addressed property held at the hearing, including property acquired after separation. This was an appeal from Western Australian proceedings under federal family law, not a NSW Supreme Court estate dispute.
The decision supplies no universal percentage or promise of equal sharing. It also predates the June 2025 reforms, so current advice must apply today’s legislation.
What inheritance documents must you disclose?
Financial disclosure requires relevant information about your direct and indirect financial circumstances, including vested or contingent property interests. The obligation begins during preparation for proceedings and continues until finalisation. Tell your lawyer about an inheritance or estate entitlement promptly, and update the information when its value, status or availability changes.
The Court’s disclosure guidance explains the continuing duty. Useful records include:
- The will, grant of probate or letters of administration, where relevant and available.
- Executor statements identifying your entitlement and expected distribution.
- Bank statements recording receipts and subsequent transfers.
- Valuations, property titles and shareholding records.
- Evidence of estate debts, disputes, conditions or other uncertainty.
Disclosure does not concede that your former partner should receive a particular share. Concealment can lead to costs orders, procedural consequences and, in appropriate circumstances, contempt proceedings or an application to set aside orders.
Can an agreement deal with an inheritance?
A properly prepared financial agreement can address inherited property or a future inheritance, while consent orders can formalise an agreed property settlement. Both require careful assessment of their scope and consequences. A casual promise that each person will keep their inheritance does not provide the same legal certainty.
Financial agreements involve strict legal requirements, including independent legal advice for each party. Legal Aid NSW’s guidance explains their potential use for future inheritances and the limited grounds on which they can be set aside. They should not be described as an absolute guarantee against challenge.
For consent orders, disclose the relevant finances and obtain advice about the proposed division. The court must be satisfied that property orders are just and equitable. Property settlement mediation may help resolve disagreement where suitable and safe, with legal review before finalisation.
What if you inherit after final orders, and what should you do now?
A genuinely later inheritance does not automatically reopen final property orders. Those orders can be changed only in limited circumstances. Concealing an existing material entitlement is a different issue and may support an application to set orders aside. Obtain advice about the particular orders, disclosure history and timing before assuming a claim exists.
Property proceedings generally must start within 12 months after a divorce takes effect, or within two years of a de facto relationship ending. Outside that period, the legislation provides routes involving both parties’ consent or court permission. Negotiations do not stop the clock, and married couples need not wait for divorce to settle property.
Prepare a chronology of the relationship, separation, death, entitlement and payments. Bring it, your financial records and any existing agreements or orders to a property settlement solicitor. Contact CM Lawyers for advice before signing a settlement or dealing with inherited assets.
General information for people separating in NSW, not individual legal advice. Have any proposed agreement or legal action checked by a lawyer against your circumstances.
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