In Australian family law, the treatment of future inheritance in divorce settlements is shaped by the principles of fairness and judicial discretion under the Family Law Act 1975 (Cth). Although the Act provides no express provision for anticipated inheritance, the Courts consistently apply the test of what is “just and equitable” in accordance with section 79.
A prospective inheritance — one that has not yet vested — is generally not treated as part of the divisible property pool. However, it may influence the Court’s overall determination when assessing each party’s financial resources and future needs. The degree of certainty, timing, and proximity of the inheritance are decisive in determining its relevance.
Statutory Basis and Judicial Approach
Under Part VIII of the Family Law Act 1975 (Cth), the Court may adjust property interests only when it is just and equitable to do so. Section 75(2) guides the Court to consider each party’s earning capacity, financial resources, and overall circumstances. Within this discretionary framework, a future inheritance may enter consideration indirectly — not as property, but as a financial resource.
The High Court in Stanford v Stanford (2012) HCA 52 emphasised that fairness depends on the totality of the parties’ circumstances. Applying that reasoning, an anticipated inheritance is considered only where its likelihood is demonstrable and material to one spouse’s post-separation financial position.
In practice, this means that while an inheritance cannot be divided before it exists, it may still affect the percentage adjustment or quantum of other entitlements to ensure equity between parties.
Property vs Financial Resource: Legal Distinction
Australian courts draw a strict distinction between property and financial resources, a principle fundamental to understanding inheritance treatment:
- Property refers to tangible or vested interests that are legally owned or controlled by either party. Under section 79 of the Family Law Act 1975 (Cth), property can be divided between the parties where it is “just and equitable” to do so. Examples include real estate, bank accounts, vehicles, superannuation, or investments that already exist or are in possession.
- Financial resources refer to probable or potential financial benefits that may arise in the future, such as an expected inheritance, trust distributions, or continuing family support. These are not divided directly but can influence the outcome under section 75(2), which allows the Court to consider a party’s future needs and earning capacity.
This distinction was clarified in Kelly & Kelly (1981) FLC 91-108, where the Court held that an unreceived inheritance could not be treated as property in the statutory sense. However, if the expectation is sufficiently certain — for example, where the testator has died but the estate is not yet distributed — it may still be recognised as a financial resource.
Later decisions, including De Angelis & De Angelis (2003) FLC 93-133 and White & Tulloch (1995) FLC 92-640, reinforced this principle by confirming that the likelihood and timing of receipt determine whether the inheritance affects a party’s entitlement.
When Future Inheritance Is Considered by the Court?
A future inheritance is considered by the Court only when it is sufficiently certain, identifiable, and relevant to achieving a just and equitable property division under the Family Law Act 1975 (Cth).
In practice, this means that the inheritance must go beyond mere expectation — there must be credible evidence showing that the benefit is likely to be received, or that it meaningfully alters one party’s financial position.
The Court generally considers a future inheritance in the following circumstances:
- The benefactor has passed away, but the estate has not yet been distributed. In this case, the entitlement has already vested, even if the funds are pending.
- A clear and unrevoked will names one spouse as a beneficiary, creating a high degree of certainty that the inheritance will be received.
- The inheritance is imminent or directly foreseeable, such as where probate has been granted or the estate is under administration.
- The inheritance forms part of ongoing financial support, where one party regularly receives financial benefits from the benefactor and is likely to continue doing so.
When these factors are present, the Court treats the inheritance not as property (because it has not yet been received), but as a financial resource under section 75(2) — influencing percentage adjustments or future-needs considerations rather than direct division.
As with all complex property matters, early consultation and finding a good family lawyer can be crucial in ensuring the inheritance is correctly classified and protected during proceedings.
Exclusion and Limitation of Consideration
Where an inheritance remains speculative — for instance, when the benefactor is alive and the will revocable — the Court will generally refrain from factoring it into the asset pool. The principle of non-interference with living estates reflects both ethical restraint and legal certainty.
However, under section 75(2)(o), the Court retains residual discretion to consider “any fact or circumstance which the justice of the case requires.” This allows judicial flexibility in cases where fairness would otherwise be compromised, for example, where an anticipated inheritance materially alters a party’s economic future.
A Binding Financial Agreement (BFA) remains the most effective mechanism to pre-empt future disputes. Such agreements, executed in accordance with sections 90B–90G or 90UB–90UD, can specify the treatment of inheritance and shield it from later claims — provided each party has received independent legal advice. Through LegalFinda, individuals can find a family lawyer experienced in drafting and certifying enforceable BFAs tailored to complex estate-planning scenarios.
Evidentiary Thresholds for Future Inheritance
A party seeking to rely on or exclude a future inheritance bears the evidentiary burden of establishing its existence or certainty. The Court may require:
- A verified copy of the will
- Executor correspondence confirming intended distribution
- Affidavits describing historical financial support or family arrangements
- Probate filings demonstrating impending entitlement.
Without sufficient corroboration, any claim based on speculative expectation is unlikely to influence the outcome. This evidentiary discipline ensures that property-settlement orders are grounded in verifiable facts rather than conjecture.
Protecting an Anticipated Inheritance During Divorce
For individuals concerned about safeguarding inherited or expected assets, proactive legal structuring is essential. Recommended strategies include:
- Maintaining asset separation: Avoid commingling inheritance funds with joint accounts or property purchases to preserve traceability.
- Implementing a Binding Financial Agreement: Define how current or future inheritances are treated upon separation.
- Ensuring documentary continuity: Retain all estate correspondence and executor notices as proof of source and timing.
- Securing independent representation: Early legal advice is crucial, particularly in complex estates or multi-jurisdictional inheritances.
Obtaining expert counsel through LegalFinda can assist in identifying practitioners with dual expertise in family law and succession planning, ensuring both compliance and protection.
Judicial Treatment of Gifts and Inheritance
Courts often analogise future inheritance to gifts received during marriage, as both represent external contributions. In Kessey & Kessey (1994) FLC 92-495, the Court considered how an inheritance used to acquire the family home became part of the asset pool, while inheritance kept separate was treated as an individual contribution.
The principle is that context, not source, determines treatment. If inherited wealth has been integrated into family finances or used for joint benefit, it is unlikely to remain quarantined.
Timing and Post-Separation Inheritances
An inheritance received after separation but before final orders may be considered property.
The Court can either:
- Include it in the asset pool
- “Quarantine” it, excluding it from division but recognising its effect on fairness and needs.
Once property orders are finalised, however, later inheritances cannot be revisited except under section 79A — typically limited to cases of fraud, non-disclosure, or miscarriage of justice.
The Bishop & Bishop (2013) FamCAFC 138 decision reiterated that finality of settlement is paramount; only demonstrable error or concealment can reopen financial proceedings.
Case Law Illustrations
Australian courts have developed a consistent body of case law clarifying how future inheritance is treated in divorce settlements. Key decisions include:
- Kelly & Kelly (1981) FLC 91-108 – Established that an unreceived inheritance is not “property” under the Family Law Act 1975 (Cth) but may be considered a financial resource when its receipt is sufficiently certain.
- White & Tulloch (1995) FLC 92-640 – Confirmed that a probable or imminent inheritance can influence percentage adjustments under section 75(2), particularly when one party’s financial position is likely to improve substantially.
- De Angelis & De Angelis (2003) FLC 93-133 – Emphasised that speculative or uncertain inheritances should not affect the property pool. Only inheritances with a clear, demonstrable link to the beneficiary are relevant.
- Kessey & Kessey (1994) FLC 92-495 – Held that inheritances used for the benefit of both parties, such as purchasing a family home, become part of the divisible asset pool.
- Bishop & Bishop (2013) FamCAFC 138 – Reinforced that an inheritance received after separation may still be considered property if fairness requires it, but inheritances received after final orders are excluded unless fraud or miscarriage of justice is proven.
These cases collectively demonstrate that courts adopt a fact-driven, equitable approach, focusing on the timing, certainty, and impact of the inheritance rather than rigid rules of inclusion or exclusion.
Family Court Guidelines and Judicial Discretion
The Family Court has not issued formalised rules governing future inheritances. Instead, judicial discretion is guided by the statutory objectives of fairness, transparency, and economic independence.
When exercising that discretion, the Court must balance two competing principles:
- Certainty of existing property rights
- Equitable adjustment based on future capacity.
Expert commentary from the Australian Institute of Family Studies and leading family-law practitioners underscores that each case requires contextual evaluation — incorporating not just financial factors, but also ethical and relational dimensions, such as caregiving or dependency on the benefactor.
Frequently Asked Questions
Before initiating property-settlement proceedings, clients commonly seek clarity on how Australian law treats future inheritances. The following addresses key concerns based on judicial authority and statutory interpretation.
How is prospective inheritance treated in Australian divorce property settlements?
A prospective inheritance is not divided as property unless the benefactor has passed away. However, it can be treated as a financial resource influencing fairness under section 75(2).
Can future inheritance be excluded from property pool calculations?
It cannot be ignored entirely but is rarely divisible. Courts may adjust entitlements if one party’s expected inheritance materially alters financial capacity.
What evidence is required to prove a potential inheritance?
Probate documents, executor statements, or a confirmed will are the most persuasive forms of evidence. Unsupported assumptions will not satisfy the Court.
How can a spouse protect an expected inheritance?
By executing a Binding Financial Agreement or maintaining inheritance funds separately. Professional advice ensures these arrangements remain valid under the Act.
What happens if an inheritance is received after divorce finalisation?
It remains the sole property of the recipient unless exceptional grounds under section 79A justify reopening the case.
Conclusion: Legal Precision and Future Protection
The treatment of future inheritance in divorce settlements reflects the Australian judiciary’s commitment to fairness without speculation. The law safeguards living estates while empowering courts to consider future resources when justice demands it.
Given the evidentiary and procedural complexity of such matters, obtaining early, expert guidance is essential.
Through LegalFinda, Australians can engage experienced practitioners who understand the intersection of family law, succession planning, and financial resource management — ensuring that entitlements are preserved, rights are protected, and settlements remain equitable in both law and outcome.
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