Post separation ‘windfalls’ – are they up for grabs?

One of the first questions asked of a family lawyer is:

1. What is my spouse entitled to; and (perhaps more importantly)
2. How long after we separate are my assets excluded from being ‘up for grabs’

It is an interesting question. If, during the period post-separation but the Court hearing of pre-property settlement, either a Husband or a Wife inherits or otherwise unexpectedly receives a significant asset or cash, is it appropriate to consider that these ‘post separation assets’ be included as part of the matrimonial asset pool available for distribution?

The following should be considered:

• Generally speaking, if an inheritance is received post separation but prior to a final property settlement, it is a matrimonial asset by the Court. Whether or not a Court determines how much, if any, of the ‘post separation asset’ should be awarded to the other party depends significantly on the contributions either party has made to the acquisition of that asset. For example:

Anne’s father, Barry lived with both parties for the last 10 years of his life. The parties’ separated and Barry died shortly after.  He left the whole of his inheritance to Anne, who asserted that her husband, John shouldn’t receive any of the inheritance.

However, John helped Barry when he lived with Anne and John. He drove Barry to doctors’ appointments, ensured that his medicine was administered and generally assisted him in the last 10 years of Barry’s life. John could be said to have contributed to the “acquisition” of the inheritance by assisting Barry later in life. In that case, it may be found that John has an entitlement to a portion of the inheritance.

However, if Anne’s sister, Stephanie and her husband Jeremy separated and Stephanie suddenly won the lottery shortly after separation, it would be difficult to consider Stephanie or Jeremy’s contributions to the “acquisition” of the lottery win.

• The timing of receipt of the ‘post separation’ asset is a relevant factor; however, it is not determinative. Simply because something is received ‘post separation’ does not automatically exclude it from the asset pool. In a recent case of Holland & Holland, the Husband received an inheritance 3.5-years after separation. The trial judge at first instance excluded the inheritance from the matrimonial asset pool and determined that it was a financial resource available to the Husband, however this decision was overturned on appeal and it was included in the matrimonial asset pool, for the following reasons:
• firstly, because a financial resource should be limited to interest which are not ‘property’ and the parties to not have a present entitlement – clearly not the case when the inheritance was an item of real property which the Husband had a present entitlement at the time of the trial; and Save & Exit
• secondly because the Court determined that it was incorrect “as a matter of principle to refer to any existing legal or equitable interests in property of the parties or either of them as excluded from or immune” from the property pool and the consideration by the Trial Judge ought to be the contributions that the party makes.

The above examples show that each case is different, and indeed as the Court is a discretionary jurisdiction there is no blanket rule in relation to how post separation inheritances and windfalls are considered. It is important to note that the contributions to each party to the acquisition of the asset are an important consideration, but not determinative. The Court will consider the contributions of both parties to the relationship as a whole in making an overall determination.

Taking the above into consideration, it is important that if you and your partner are in the process of separating or contemplating a separation, you should seek legal advice and attempt to finalise your property settlement as soon as possible, so as to avoid future possible windfalls being included in the matrimonial asset pool and available for distribution.

Please contact us at Clinch Long Woodbridge on (02) 9279 4888 if you would like assistance with a separation.

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