It is not unusual for a couple who have separated to wait years or even decades before formally finalising their property division. It is important to note that there are only two ways to formalise a property settlement by agreement after separation: Consent Orders which are approved by the Family Court of Australia or a Financial Agreement which properly complies with the requirements of the Family Law Act 1975 (Cth). If one of these forms of agreement is not used, then the parties leave themselves open for possible conflict in the future, and it is not unheard of for a party to try to take another bite of the cherry years after the parties have parted ways.
If this occurs, then parties are generally reluctant to include any assets that they have acquired after separation in the property pool for division. A number of recent cases in the Family Law Courts have set the record straight about how inheritances and other assets obtained after separation should be treated in a property division, even if that formal division of property does not occur for some time later.
In the case of Calvin & McTier [2017] FamCAFC 125 (12 July 2017), although the parties had separated many years earlier, the Magistrates Court of Western Australia included the husband’s inheritance that he had received 4 years after separation in the property pool. The husband appealed this decision, but the appeal was dismissed by the Full Court of the Family Court of Australia. The Full Court determined that it was up the Judge presiding over the matter to use their discretion to decide how inheritances and other after-acquired property should be considered in the property pool. It appears in this case that the Full Court was saying that inheritances and other property acquired after separation should be included in the property pool as a whole, but possibly dealt with in a separate pool from the property acquired during the relationship.
Further, in the matter of Holland [2017] FamCAFC 166 (9 August 2017), the Full Court of the Family Court of Australia again reiterated that inheritances obtained after separation should not be excluded from the property pool as a whole.
Of course, it does not follow that any inheritances received or assets acquired after separation should be evenly divided between the parties; but that the contributions of each party to the acquisition of the asset should be considered and the asset divided on that basis. For example, if an inheritance was received by one party 5 years after separation and the other party did nothing to contribute to its acquisition, then it should follow that the first party would be entitled to 100% of the inheritance. On the other hand, if one party purchased a property and allowed the second party to reside in it and pay rent to the first party, then it may follow that the second party has contributed to the increase in net value of the asset and that they have therefore contributed to the resulting value. Evidence will play a very large part in these matters and over time, the availability and quality of evidence erodes, which can cause issues.
It is therefore vital that parties resolve their property matters and formalise any agreements in a valid format as soon as possible after separation to avoid any nasty surprises down the track.
If you need any help to finalise a property settlement, please contact us for assistance.
