A parent or grandparent has left you something, and you are now separating from your partner. Whether the inheritance arrived before the relationship began, during it, or after separation was announced, one question tends to surface quickly: is it yours to keep?
The honest answer is that an inheritance does not sit outside a property settlement automatically. Under the Family Law Act, the courts can consider any property of either party, regardless of how or when it was acquired, according to the Federal Circuit and Family Court of Australia. An inheritance is treated as a contribution on behalf of the person who received it, and its weight in the final outcome depends on factors such as the length of the relationship and what happened to the money or asset over time.
Our Springfield team helps clients across Greater Springfield and Ipswich with inheritance and property settlement questions, and with the estate planning that can reduce risk before a relationship ends.
Here is how Queensland succession law and the Family Law Act treat inherited assets, and what options genuinely exist to protect them.
Key takeaways
- An inheritance can be considered in a property settlement regardless of when it was received.
- How an inheritance is treated depends on the length of the relationship and other contributions.
- A binding financial agreement made before or during a relationship can address future inheritances.
This article is general information only and is not legal advice. Every situation is different, and you should speak with a solicitor about your own circumstances.
How does the Family Law Act treat an inheritance in a property settlement in Queensland?
A property settlement can cover all types of property of either party, including inheritances, whether received before, during or after the relationship, according to the Federal Circuit and Family Court of Australia. There is no category of asset that sits automatically outside the pool.
An inheritance is generally treated as a contribution by the person who received it, on behalf of themselves, according to Legal Aid New South Wales. The court weighs that contribution alongside all others: financial contributions such as income and property brought into the relationship, non-financial contributions such as caring for children or running a household, and indirect contributions such as supporting a partner's career.
No property or debts are excluded from consideration, and no formula decides the outcome, according to the Federal Circuit and Family Court of Australia. The court asks what is just and equitable on the specific facts.
Does it matter when the inheritance was received?
The timing of an inheritance is one of the factors a court considers, but it does not set a fixed rule about what happens, according to Legal Aid New South Wales.
In a long relationship, an inheritance received early on is likely to carry less weight than in a short relationship, because other contributions build up over time, according to the Legal Services Commission of South Australia. As an inherited asset becomes mixed with other property, or as the other person contributes directly or indirectly to its maintenance or improvement, its significance tends to decrease.
An inheritance not yet received at the time of a settlement is treated differently. It is an example of a financial resource, a source of support reasonably available to a person, rather than property that can be divided, according to Legal Aid New South Wales. Financial resources can be taken into account by the court even though they cannot be split.
What makes a court give an inheritance more or less weight?
The court weighs contributions against each other rather than assigning a dollar-for-dollar value to each one, according to Legal Aid Western Australia. Substantial initial contributions carry more weight in short relationships than in long ones.
Several things tend to reduce the weight a court gives to an inheritance over time:
- › Mixing: depositing an inheritance into a shared account or using it to pay down a joint mortgage can blend it with other property.
- › Improvement by the other person: if a partner contributed to maintaining, renovating or growing the inherited asset, their contribution is also recognised.
- › Length of the relationship: the longer the relationship, the more other contributions tend to balance initial ones, according to the Legal Services Commission of South Australia.
- › Children: the Family Law Act requires the court to take into account the extent to which either party has the care of a child of the marriage under 18, including the need to provide appropriate housing.
When does a testamentary trust help, and when does it not?
A testamentary trust is a trust set up inside a will that begins at the will-maker's death. Moneysmart notes that assets in a testamentary trust may offer some protection from divorce settlements and bankruptcy proceedings, because the beneficiary does not simply hold the money outright.
However, an interest in a discretionary trust is treated as a financial resource, not as property that can be divided, according to Legal Aid New South Wales. A financial resource can still be taken into account by a court even though it cannot be split directly. Property owned by a legal entity that a person owns or controls must also be disclosed, and a trust is a legal entity, according to the Federal Circuit and Family Court of Australia.
Whether a testamentary trust genuinely changes the outcome in a settlement depends on how it is structured, what control the beneficiary has, and the specific circumstances of the case. A solicitor and an accountant both advise on this, and the protection is never guaranteed.
"An inheritance is treated as a contribution by the person who received it, but what that means for a settlement depends entirely on how the relationship unfolded and what happened to that asset over time."
Jade Kickbusch, Principal, Brookwater Legal
How does a binding financial agreement address an inheritance?
A binding financial agreement is a contract made under the Family Law Act that can address how property and financial resources are divided if the relationship ends. Married and de facto couples can enter into one before, during or after a relationship, according to the Federal Circuit and Family Court of Australia.
An agreement made before a marriage can deal with how, if the marriage breaks down, all or any of the property or financial resources of either or both parties is to be dealt with, whether held at the time the agreement is made or at a later time before divorce, according to the Family Law Act.
Legal Aid New South Wales notes that a binding financial agreement can protect an inheritance that a person may receive in the future, and that a court can set one aside only in limited circumstances.
For an agreement to be binding under the Family Law Act, each party must have received independent legal advice from an Australian lawyer before signing, and each must be given a signed statement from their lawyer confirming that advice was provided. Without those steps, the agreement is not binding.
A binding financial agreement can be set aside under the Family Law Act on grounds including fraud, non-disclosure of a material matter, the agreement being impractical to carry out, or unconscionable conduct in making it.
How does a solicitor help protect an inheritance in Queensland?
There are four general steps involved in addressing inheritance risk, whether the concern is for a future inheritance or one already received.
Step 1: Talk to us
Get in touch and we will explain how the Family Law Act and Queensland succession law interact in your general situation, and what the options look like.
Step 2: Review the current position
We look at what property is held, how it is held, what financial agreements if any are already in place, and what the will or estate plan of the person leaving the inheritance currently provides.
Step 3: Prepare the appropriate documents
Depending on the circumstances, we prepare a binding financial agreement, review or draft a will that includes a testamentary trust structure, or advise on how existing assets are held. Every document is prepared to meet the independent legal advice requirements the Family Law Act sets.
Step 4: Keep the plan current
We advise on when to review the arrangement, because a change in the relationship, a new asset, or a change in the family structure can all affect how a court would approach the position.
| Get in touch Need help with protecting an inheritance? We're an experienced team who keep you well informed at every stage of the process. Get in touch to discuss your needs. |
When does this kind of planning not apply to you?
Not every inheritance concern requires the same response, and for some people the risk is lower than it first appears.
If the relationship is long-established, both parties have contributed substantially throughout it, and the inherited asset has been mixed into the household finances, an agreement now is unlikely to change how a court would approach that history. The contribution has already been made and is part of the overall picture.
If an inheritance is genuinely anticipated but has not been received, it is a financial resource rather than property. A court can take it into account, but it cannot be divided. An agreement that anticipates it can still be useful, but it is a different kind of provision to one that protects an asset already held.
If the will-maker is the one seeking to protect the gift rather than the beneficiary, the relevant tool is estate planning: a testamentary trust in the will rather than a financial agreement between the couple. A solicitor advises on which layer, or which combination, addresses the actual concern.
What do the courts say a person must disclose in a property settlement in Queensland?
Disclosure obligations apply to all parties from the time pre-action procedures begin, and they continue until the case is finalised, according to the Federal Circuit and Family Court of Australia. The duty covers all sources of earnings, interest, income, property and other financial resources, whether held directly or through corporations, trusts, companies or other structures.
This means an inheritance held in a testamentary trust must be disclosed. An expected inheritance must be disclosed as a financial resource. Any disposal of property made in the year before separation, or since separation, that may affect a claim must also be disclosed.
Where a party fails to disclose an asset, the court may adjust the settlement in favour of the other party where there is enough evidence, according to Legal Aid New South Wales.
Frequently Asked Questions
Is an inheritance automatically protected from a property settlement in Queensland?
No. Under the Family Law Act, a court can consider any property of either party regardless of how or when it was acquired, according to the Federal Circuit and Family Court of Australia. An inheritance is treated as a contribution, not a protected category.
Does it matter whether the inheritance came before or during the relationship in Queensland?
Timing is a factor, but not a decisive rule. According to the Legal Services Commission of South Australia, a person is not always entitled to keep gifts and inheritances from family, and their importance decreases as they become mixed with other property over time.
Can a binding financial agreement protect a future inheritance in Queensland?
Generally, yes. Legal Aid New South Wales notes that a binding financial agreement can protect an inheritance a person may receive in the future. For it to be binding under the Family Law Act, both parties must receive independent legal advice from an Australian lawyer before signing.
What is a testamentary trust, and can it protect an inheritance in a property settlement?
A testamentary trust sits inside the will and begins at the will-maker's death. Moneysmart notes it may offer some protection from divorce settlements, but an interest in a discretionary trust is still a financial resource that can be taken into account by a court, according to Legal Aid New South Wales.
Does an expected inheritance have to be disclosed in a Queensland property settlement?
Yes. Disclosure obligations cover all financial resources reasonably available to a party, which includes an anticipated inheritance, according to the Federal Circuit and Family Court of Australia. An expected inheritance is a financial resource, not property, and cannot be divided, but must still be disclosed.
Do I need a solicitor to protect an inheritance from a separation in Springfield or Ipswich QLD?
A solicitor plays a necessary role in two of the main options. A binding financial agreement is only binding under the Family Law Act if each party receives independent legal advice from an Australian lawyer before signing. A testamentary trust requires a carefully drafted will. Wills and estates advice from a solicitor is the starting point for both.
Can a court set aside a binding financial agreement that protects an inheritance in Queensland?
Yes, in limited circumstances. The Family Law Act allows a court to set aside a financial agreement on grounds including fraud, non-disclosure of a material matter, unconscionable conduct in making it, or where it has become impractical to carry out.
Your Next Steps
An inheritance sits at the intersection of Queensland succession law and the Commonwealth Family Law Act, and each layer involves its own timing, documentation and professional requirements. For families in Ipswich, Springfield and across Greater Springfield, getting the right structure in place early is generally far more straightforward than addressing it after a relationship has broken down.
Every inheritance and property settlement matter is different, and that's exactly why it's worth a conversation. Make an appointment with the Brookwater Legal team or call (07) 3437 8555.
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External Resources
- Federal Circuit and Family Court of Australia - Financial or property overview
- Federal Circuit and Family Court of Australia - Financial or property: Financial agreements
- Legal Aid Queensland - Property and financial agreements
- Queensland Public Trustee - Our testamentary trust service
- Moneysmart - Wills and powers of attorney
- Family Law Act 1975 (Commonwealth) - Compilation No. 101
Brookwater Legal · This article contains general information only and does not constitute legal advice. It does not take into account your individual circumstances. You should obtain legal advice about your own situation before acting on anything in this article. Liability limited by a scheme approved under Professional Standards Legislation.
