Key Takeaways
- If you separate or get divorced, your inheritance could be considered part of the property pool and may be divided as part of your property settlement, it is not automatically protected.
- The 10 June 2025 reforms to the Family Law Act 1975 (Cth) codified the four-step framework courts use to decide property matters, and tightened the duty of disclosure that applies to inheritances received after separation.
- How a court treats your inheritance depends on when you received it, how it was used, the size of the inheritance relative to the property pool, and the intentions of the person who left it to you.
- The same principles apply to de facto couples as to married couples, though some time limits differ.
- You can take steps to protect an inheritance such as a Binding Financial Agreement or Consent Orders can formalise how an inheritance is treated.
- An inheritance can also affect spousal maintenance payments.
Inheritance after separation
Australians are entering the largest intergenerational wealth transfer in our history. For many people, an inheritance is the single largest financial event of their adult life.
So when a relationship ends around the same time, the question of what happens to that inheritance becomes urgent.
The short answer: inheritance is not automatically protected in a property settlement.
Whether you keep your inheritance, share it, or have it offset against other assets depends on several factors, including when you received it, how it was used during the relationship, and the size of the inheritance relative to everything else you and your former partner own.
Property settlements are difficult to resolve at the best of times.
Adding an inheritance to the mix, especially one that carries emotional weight from a family member who has passed, can make the process more contested and more painful.
In this guide, our expert property settlement lawyer will walk through how inheritance and divorce work in Australia after the 2025 family law reforms, what factors influence how a court treats an inheritance, how the same principles apply to de facto couples, and what you can do to protect an inheritance.
How the 2025 family law changes affect inheritance in property settlements
On 10 June 2025, significant amendments to the Family Law Act 1975 (Cth) came into effect, changing how courts in Australia decide property settlement matters.
These reforms are particularly relevant for anyone dealing with an inheritance during or after a separation.
The reforms did three important things :
- Codified the four-step framework. The structured approach courts have used for decades to decide property settlements is now written directly into the legislation. This makes the process more transparent and predictable — and it means we can explain it to you with more confidence than ever before.
- Strengthened the duty of disclosure. Both parties to a property settlement must now provide more complete and timely information about their finances, including any inheritance received before or after separation. Failing to disclose can have serious consequences, including costs orders and adverse inferences drawn by the court.
- Clarified how family violence is considered. Family violence is now an explicit factor courts may consider when assessing contributions and future needs — relevant in some inheritance disputes where coercion or financial abuse is alleged.
If you started your property settlement matter before 10 June 2025, transitional rules may apply.
We’ve covered those in detail in our guide on whether the 2025 family law changes apply to your case.
The most important practical takeaway: if you’ve separated and you receive an inheritance, or you’re worried your former partner has — the duty of disclosure is real, and the court now has clear statutory authority to consider it.
How courts approach property settlement: the four-step framework
Under the Family Law Act 1975 (Cth), courts use a four-step framework to decide property matters.
This is the same framework used for an inheritance, a family home, a business, or any other asset.
Understanding these four steps will help you see how an inheritance fits into the bigger picture.
Step 1 : Identify and value the property pool
The court works out what you and your former partner own, both individually and jointly.
This includes real estate, superannuation, savings, business interests, vehicles, debts, and yes, inheritances, whether received before, during, or after the relationship.
At this stage, the court isn’t deciding who gets what. It’s just building a complete picture of the assets and liabilities on the table.
Step 2 : Assess the contributions of each party
The court then considers what each of you contributed to the relationship.
Contributions can be :
- Financial : income, savings brought into the relationship, inheritances, gifts, lottery winnings.
- Non-financial : renovations, maintenance, unpaid work that increased the value of an asset.
- Homemaking and parenting : looking after children, running the household.
An inheritance is typically considered a financial contribution by the spouse who received it.
How much weight that contribution carries depends on the timing and use of the inheritance (which we cover in detail below).
Step 3 : Consider future needs (the “section 75(2) factors”)
The court then looks forward.
Factors that may justify an adjustment in your favour or against you include :
- Age and health of each party
- Earning capacity
- Care of children
- Length of the relationship
- Any other relevant fact or circumstance
A large inheritance received by one party can affect this step — it may reduce that party’s future needs entitlement, or it may be considered in the overall division.
Step 4 : Ensure the outcome is just and equitable
Finally, the court stands back and asks: is the proposed division just and equitable in all the circumstances?
Following the law-makers’ intent in the 2025 reforms, this step is now an explicit requirement rather than an implied one.
There is no fixed formula.
Every case is decided on its own facts, and judicial officers retain discretion to adjust the outcome to reflect what’s genuinely fair.
Our article on property settlement after divorce breaks this down even further to help you understand the approach.
What is an inheritance?
An inheritance is the transferring of assets to a person upon the death of an individual.
The deceased is known as the benefactor, and they can transfer a wide variety of assets to a beneficiary such as money, real estate, shares, jewellery, a business, vehicles, or anything else of value.
Most commonly, inheritances pass between family members such as a parent or grandparent leaving assets to a child or grandchild.
However, a person who is not a family member can also leave you an inheritance through their will.
For property settlement purposes, what matters isn’t the relationship between you and the benefactor, it’s the value of what you received, when you received it, and what happened to it after that.
Will you get to keep your inheritance if you get divorced or separate?
Inheritance is not automatically protected from a property settlement.
It can be treated as part of the matrimonial asset pool that needs to be divided when you separate or divorce.
Whether you keep your inheritance or share part of it depends on the factors we’ll cover below.
If you and your former partner can agree about how the inheritance should be treated, you can formalise that agreement with a Consent Order or a Binding Financial Agreement.
A Consent Order is made when you separate, to lock in your agreed division.
A Binding Financial Agreement can be made at any time, before, during, or at the end of a relationship and can act as a safeguard if things end.
If you can’t agree, a court will need to decide how the inheritance, along with everything else, is treated. That decision will follow the four-step framework above.
How does a court treat inheritance?
Within the four-step framework, the court will decide whether to include the inheritance in the property pool or to quarantine it as a separate contribution attributed to the recipient.
Several factors influence which approach the court takes:
- The timing of the inheritance — before, during, or after the relationship.
- Whether the inheritance was kept separate or commingled with joint assets.
- How the inheritance was used — for example, to buy the family home, pay for a holiday, fund renovations, or settle debts.
- The size of the inheritance relative to the rest of the property pool.
- The intentions of the benefactor — did they specify the inheritance was for the recipient only, or for the couple?
Of these, timing is often the single most influential factor.
Case law on post-separation inheritance. Two Full Court decisions are particularly important for understanding how courts treat inheritances received after a couple has separated.
In Calvin & McTier [2017] FamCAFC 125, the Full Court of the Family Court confirmed that a post-separation inheritance can be included in the property pool, even when it was received well after the parties had separated.
The court has discretion to decide how to treat it but it is not automatically excluded just because the relationship had ended.
In Holland & Holland [2017] FamCAFC 166, the Full Court rejected the argument that property received after separation should be quarantined as a matter of principle.
The decision reinforces that there is no rule of automatic immunity, every case turns on its facts.
The practical takeaway : a post-separation inheritance is not automatically yours alone. Whether your former partner has any claim on it depends on the size of the inheritance relative to the rest of the pool, the length of time between separation and the inheritance, and the broader circumstances of the case.
Why does it matter when the inheritance was received?
The timing of an inheritance influences how the court treats it because under the four-step framework contributions are weighted against the length and nature of the relationship.
If you received the inheritance before the relationship, or very early into it, it may be treated as an initial contribution.
If the inheritance was substantial and helped build the assets you and your partner accumulated together, the court may recognise that contribution in your favour.
However, in a long relationship, the impact of an early inheritance often diminishes — the other party’s contributions over many years tend to offset it.
If you received the inheritance during the relationship, the treatment depends largely on how it was used.
If the inheritance funded the family home, paid down a joint mortgage, was used for a family holiday, or otherwise benefited both of you, the court is more likely to treat it as a shared asset.
If you kept it entirely separate — in your own account, used only for your own purposes — there’s a stronger argument that it should be quarantined or attributed primarily to you.
If you received the inheritance after separation, it can still be relevant. As Calvin & McTier and Holland & Holland confirm, a post-separation inheritance is not automatically protected.
It may be included in the pool or treated as a contribution that affects the overall division, depending on the circumstances.
The court will weigh how recently the inheritance was received, the size of it, and what’s just and equitable for both parties.
Does the same apply to de facto couples?
Yes, with one important difference around time limits.
Under the Family Law Act 1975 (Cth), de facto couples in Australia (including same-sex couples) are subject to the same property settlement principles as married couples.
The four-step framework applies.
The treatment of inheritances including timing, use, intentions, size works the same way.
The duty of disclosure is the same.
What differs is how long you have to start a property settlement claim:
- Married couples – you have 12 months from the date your divorce is finalised to apply for property orders.
- De facto couples – you have two years from the date of separation to apply.
If you’ve separated from a de facto partner and you’ve received an inheritance (or you’re worried they have), these time limits matter. Acting outside them requires special leave from the court, which isn’t always granted.
If you’re unsure whether your relationship qualifies as a de facto relationship under the Act, our team can advise on your specific circumstances.
What about a future or expected inheritance?
A common question we hear: “My elderly parent might leave me an inheritance — does that count?“
Generally, a future or expected inheritance is not considered part of the property pool. The court can’t divide assets that don’t yet exist, and the testator (the person making the will) has the right to change their will at any time.
There is, however, an important distinction here. In family law, the court draws a line between property (assets that can be divided) and a financial resource (something one party has access to that isn’t divided directly, but can influence how the rest of the pool is split).
A future inheritance, if relevant at all, is much more likely to be treated as a financial resource than as property.
This becomes more important in specific circumstances :
- If the testator is critically unwell or has lost capacity – the inheritance may be considered imminent enough that the court treats it as a financial resource affecting the overall division.
- If there is a duty to disclose – even an expected inheritance may need to be mentioned during the property settlement process, particularly if it’s likely to materialise soon.
- If a Binding Financial Agreement is being negotiated – a sunset clause or specific provision can be included to address what happens if an anticipated inheritance is received.
The practical guidance : if a parent or close family member is seriously unwell during your separation, mention it to your lawyer. It may need to be addressed proactively rather than treated as an irrelevant future possibility.
How does inheritance affect spousal maintenance?
Spousal maintenance is financial support one party pays the other after separation, where one party can’t meet their reasonable needs from their own income or assets.
An inheritance can affect spousal maintenance in two ways.
If you receive an inheritance : your need for spousal maintenance may reduce or end. The court (or the paying party) may argue that the inheritance provides you with the resources to meet your own needs, and that ongoing maintenance is no longer justified. Existing maintenance orders can be varied if your financial circumstances change materially — which a substantial inheritance usually does.
If your former partner receives an inheritance : if you’re paying spousal maintenance and your former partner inherits significantly, you may be able to apply to reduce or terminate the payments. The same principle applies — their reasonable needs may now be met from the inherited assets.
Sunset clauses in financial agreements : If you’re entering into a Binding Financial Agreement and an inheritance is anticipated, a well-drafted agreement can include a sunset clause that addresses what happens if an inheritance is received. For example: maintenance obligations cease if the inheritance exceeds a certain threshold. These clauses need to be drafted carefully to be enforceable.
If you receive an inheritance after you’ve separated, does this need to be disclosed?
Yes, and the obligation is stronger than it used to be. Following the 10 June 2025 reforms, the duty of disclosure was tightened and now applies more clearly to assets received between separation and finalisation of the property settlement.
If you’re in the middle of a property settlement that hasn’t been finalised, any inheritance you receive must be disclosed.
The value of the asset pool is assessed at the date of the court proceedings, not at the date of separation, so all assets held by either party at the time of decision are relevant.
This disclosure obligation allows the court to make decisions in a just and equitable manner.
Failing to disclose can have serious consequences:
- Adverse inferences – the court may assume the worst about undisclosed assets.
- Costs orders – you may have to pay your former partner’s legal costs.
- Setting aside orders – if non-disclosure is discovered after final orders are made, those orders can be set aside.
Disclose. Always disclose.
Even if you’re not sure whether something is relevant, our family lawyer can advise and the risk of under-disclosing is much greater than the risk of over-disclosing.
How is a property settlement decided by the courts?
When it comes to dividing assets, including inheritance, if you and your former spouse are unable to come to an agreement, even after family dispute resolution attempts, then the way in which your assets are divided will be decided by the courts.
There is no exact sum or formula for how the courts will decide to split your assets, instead every case is treated differently with their unique circumstances taken into consideration. Some factors that may also be taken into consideration include:
- Direct and indirect financial contributions made by each party to the relationship.
- Responsibilities and duties of each party, such as childcare and homemaking.
- The ongoing and future financial needs of each party, which can be impacted by age, health and ability to work.
A decision of how the property and assets are to be divided will be made by a judicial officer once all evidence has been heard. Their decision will be based on what is considered to be just and equitable in your unique circumstances.
Can you protect an inheritance that you received during your relationship?
The most effective way to protect an inheritance received during a relationship is to enter into a Binding Financial Agreement, sometimes called a “BFA” or a post-nuptial agreement.
A Binding Financial Agreement can :
- Quarantine the inheritance from the rest of the property pool.
- Specify how the inheritance is to be treated if the relationship ends.
- Set out what happens to any income or growth generated by the inheritance.
To be enforceable, a Binding Financial Agreement must meet specific legal requirements, including that both parties have received independent legal advice before signing.
Without that, the agreement can be set aside.
An important caveat :
Binding Financial Agreements are generally enforceable but not 100% bulletproof.
They can be set aside in some circumstances — fraud, duress, material change of circumstances, or technical drafting failures.
You reduce the chances of an agreement being overturned by working with experienced family lawyers who specialise in property settlement matters.
Practical strategies to support a Binding Financial Agreement (these can also be relevant on their own):
- Keep inherited assets separate – in your own name, in your own account, not commingled with joint finances.
- Document the intentions of the benefactor – if the will is specific about who the inheritance is for, that helps.
- Avoid using inherited funds for joint purposes – particularly the family home, where commingling is hardest to undo.
- Get advice early – before you receive the inheritance, if possible, so a plan is in place.
Read more about the details of Binding Financial Agreement in our article.
How can a lawyer help you with inheritance and property settlement matters?
- Assessing the likely treatment of your inheritance under the four-step framework.
- Drafting or reviewing a Binding Financial Agreement.
- Negotiating Consent Orders that formalise an agreed outcome.
- Advising on disclosure obligations.
- Representing you if your matter proceeds to court.
Frequently asked questions
Is inheritance split in divorce in Australia?
Inheritance is not automatically split, but it is not automatically protected either.
Under the Family Law Act 1975 (Cth), an inheritance can be included in the property pool that’s divided between separating spouses or de facto partners.
Whether — and how much — your inheritance is divided depends on when you received it, how it was used, the size of the inheritance compared to the rest of the pool, and the intentions of the person who left it to you.
Can my ex claim inheritance received after separation?
Possibly.
Following the Full Court decisions in Calvin & McTier [2017] FamCAFC 125 and Holland & Holland [2017] FamCAFC 166, a post-separation inheritance is not automatically excluded from the property pool.
It can be included in the pool or considered in the overall division, depending on factors like how long after separation it was received and the size of the inheritance.
The 2025 reforms also confirm a strong duty of disclosure for any inheritance received before final orders are made.
Does it matter if I used the inheritance for the family home?
Yes — significantly. If you used inherited funds for the family home or for any other joint purpose, the inheritance is more likely to be treated as a shared contribution to the relationship rather than a separate asset.
This is one of the most common ways an inheritance loses its “quarantined” status. If protecting an inheritance is important to you, keeping it separate from joint finances matters.
Are de facto couples treated the same as married couples for inheritance?
Yes.
Under the Family Law Act 1975 (Cth), de facto couples in Australia (including same-sex couples) are subject to the same property settlement principles as married couples — including how inheritance is treated.
The main practical difference is the time limit to apply for property orders: two years from separation for de facto couples, versus 12 months after divorce is finalised for married couples.
Can inheritance be protected in advance?
Yes — the most effective way is a Binding Financial Agreement, which can quarantine an inheritance and specify how it’s to be treated if the relationship ends.
The agreement must meet strict legal requirements, including independent legal advice for both parties, and should be drafted by a lawyer experienced in this area.
Other practical steps — keeping inherited assets separate, documenting the benefactor’s intentions, and avoiding using inherited funds for joint purposes — can support the agreement and strengthen your position.
Choose Unified Lawyers for inheritance and divorce property settlement matters in Australia
If you need an experienced and approachable family lawyer to help you with an inheritance matter, our team can help.
We work across all kinds of property settlement, separation, and divorce matters,including those that involve inheritance disputes, Binding Financial Agreements, and complex disclosure issues.
Discuss your situation with a family law specialist in Brisbane, Sydney, Melbourne, or anywhere in Australia, for a free consultation today.
Call us on 1300 667 461 or book online.