Can a Spouse’s Inheritance Be Taken Into Account in Divorce Property Settlements in Australia?

Divorce is a time of uncertainty — emotionally, financially, and legally. One of the most common questions we hear at SimplyDivorce is: “Will my spouse’s inheritance be part of our property settlement?” It’s a fair concern, especially when large sums of money or family assets are involved.

The answer is: it depends. Under Australian family law, inheritance can be taken into account in financial and property settlements — but whether it forms part of the divisible asset pool depends on several key factors.

What Does the Law Say?

In Australia, property settlements following separation or divorce are governed by the Family Law Act 1975. The Act gives the Family Court broad discretion to make orders that are "just and equitable" after considering the individual circumstances of each case.

Section 79 of the Family Law Act deals with altering property interests and requires the court to consider both:

• The contributions made by each party, including financial and non-financial contributions, and

• The future needs of each party.

Inheritances — whether received before, during, or after the relationship — are generally considered financial contributions. But how the court deals with that contribution, and whether the inheritance forms part of the divisible asset pool, depends on the timing and use of the inheritance.

Timing Matters: When Was the Inheritance Received?

Before the Relationship

If the inheritance was received before the relationship began, the court may treat it as an initial contribution by the person who inherited it. For long marriages, early contributions can become less significant over time, especially if the inherited asset was intermingled with joint assets — such as using inherited funds to purchase a family home.

During the Relationship

An inheritance received during the marriage is often treated as a financial contribution by the spouse who received it. If it was kept separate and not used for joint purposes, it may not be included in the asset pool but considered in assessing that party’s overall contributions.

However, if it was used to benefit both parties — for example, paying off the mortgage, renovating the family home, or funding family expenses — it is more likely to be seen as a joint asset and included in the pool.

After Separation

Inheritances received after separation are generally less likely to be included in the asset pool. However, the court may still take them into account when determining the overall fairness of the settlement, especially if the other spouse has significantly greater financial needs.

What Does the Case Law Say?

There’s a well-established body of case law that provides guidance on how inheritances are treated in family law proceedings.

In Bonnici v Bonnici (1992) FLC 92-272, the Full Court held that an inheritance received late in the relationship, which had been kept separate, should be treated as a contribution by the receiving spouse, not automatically included in the asset pool. However, it still impacted the division of property.

Similarly, in White v White (1995) FLC 92-640, the court found that an inheritance received during the marriage was a contribution, but its significance diminished over time due to both parties' ongoing efforts and joint financial decisions.

The case of Kowaliw v Kowaliw (1981) FLC 91-092 established the principle that the Family Court is not required to ignore inherited property simply because it was received by one party — rather, the entire financial history and conduct of the parties are assessed holistically.

In Holland v Holland (2017) FLC 93-773, the High Court considered whether an inheritance received after separation could be included in the asset pool. While the inheritance was kept separate, the court found it should be considered under Section 75(2) — the future needs factors — rather than added to the property pool.

Will My Inheritance Be Divided?

Ultimately, whether your inheritance is included in the asset pool or not comes down to:

• The timing of the inheritance

• How it was used

• The length of the relationship

• Whether the inheritance was intermingled with joint assets

• Each party’s contributions and future needs

The Family Court aims to achieve a fair result — and “fair” does not necessarily mean equal. An inheritance might be excluded from the pool but still considered as part of the overall fairness assessment when dividing assets.

How to Protect an Inheritance in Divorce

If you’re concerned about protecting an inheritance, there are steps you can take. Entering into a Binding Financial Agreement (BFA) is one way to formally record how assets — including inheritances — should be treated in the event of separation. BFAs can be made before, during, or after a relationship and can provide peace of mind.

Keeping inherited funds separate from joint accounts, avoiding using them for joint expenses, and maintaining clear documentation can also help support your claim that the inheritance was not intended to be shared.

Conclusion

In Australia, there’s no blanket rule about inheritances in divorce. Each case is assessed on its own facts, and the outcome often hinges on how the inheritance was received and managed within the relationship. While case law gives useful guidance, it also shows that the Family Court retains wide discretion.

If you're navigating a divorce and concerned about the impact of an inheritance, it's vital to get tailored legal advice from a family law expert.

At SimplyDivorce, we’re here to help you understand your rights, your risks, and your options. Speak to a family lawyer to get clarity on how your inheritance may be treated — and how to protect what matters most.