How is an Inheritance Treated in Divorce and Property Settlement?

The statutory framework in outline

Property settlement between married parties is governed by section 79 of the Family Law Act 1975 (Cth) and between eligible de facto parties by section 90SM. The provisions are parallel. Since 10 June 2025, when the substantive amendments made by the Family Law Amendment Act 2024 (Cth) commenced, both sections set out expressly a structure previously developed through case law: identify the parties’ existing legal and equitable rights and interests in property and their existing liabilities; take into account the contributions considerations in section 79(4) or section 90SM(4); and take into account the current and future circumstances considerations in section 79(5) or section 90SM(5). Overarching all of it, section 79(2) and section 90SM(2) provide that the court must not make an order unless satisfied that, in all the circumstances, it is just and equitable to do so. There is no assumption that any alteration of property interests will be made at all.

Three features matter particularly for inheritances. The considerations are matters to be taken into account, not a formula. The word existing in section 79(3)(a) means the parties’ present holdings are what is identified, so inherited funds received and then spent belong in the contributions and current-and-future-circumstances analysis rather than on a balance sheet as though the money were still there. And an inheritance received during the relationship is most naturally analysed as a financial contribution by the party who received it.

The full statutory lists and the “four-step” shorthand are set out in our guides to the complete property settlement process and the four-step property settlement process. One distinction is worth stating here: a divorce order dissolves a marriage but does not divide property.

“Pool” terminology and methodology

The “pool” is convenient shorthand for the net value of what the parties own and owe. Taken literally it produces two opposite errors.

The first is to assume that because an inheritance is property it must go into one undifferentiated pool and be divided with everything else. Identification is not division: nothing in section 79 or section 90SM requires a single balance sheet, a single percentage or identical treatment of every asset, and inherited property may be evaluated with the other property or assessed distinctly within the overall assessment.

The second is the mirror image — that calling something an inheritance immunises it. It is wrong in principle to describe existing legal or equitable interests in property as “excluded” or “immune” from consideration, and the direction to identify existing rights, interests and liabilities admits of no exception for property that came from a deceased relative. The court’s task is evaluative and discretionary: no rule requires every inherited dollar to be divided, and none permits any inherited dollar to be ignored.

Received, vested, contingent and expected interests

Much confusion about inheritances is really confusion about what kind of interest is being discussed.

Inherited property already distributed. Once an estate has been administered and a distribution made, the beneficiary has ordinary property — money, a transferred title, a share portfolio — identified like any other asset. If it has been converted into something else, the question becomes one of tracing and evidence.

A beneficiary’s position during administration. Before administration is complete, the executor or administrator holds the estate for the purposes of administration — paying debts, funeral and testamentary expenses, tax and the costs of administration — and a residuary beneficiary does not own any particular estate asset. That is the principle settled in Commissioner of Stamp Duties (Qld) v Livingston [1965] AC 694; (1964) 112 CLR 12, a Privy Council decision on appeal from Australia that remains the orthodox statement. It is therefore wrong to assert that a beneficiary owns the deceased’s house or a particular parcel of shares merely because the will leaves them the residue.

The right to due administration. What the beneficiary does have during administration is a real and enforceable right — a chose in action — to compel proper administration. Whether and how it is brought into account depends on how far administration has progressed and how reliably the eventual entitlement can be quantified.

A vested entitlement awaiting distribution. Where the will gives a specific legacy or defined share, the estate is solvent and the entitlement is quantifiable, the interest is much more readily treated as property even though the money has not been paid, and the practical question shifts to valuation and timing.

A contingent entitlement. Some gifts depend on a condition — attaining a stated age, surviving another person, an event occurring. A contingent interest is an interest, and it is expressly disclosable under the Rules, but its value reflects the contingency: the more speculative the condition, the less weight it bears.

Testamentary trust interests. A fixed entitlement under a testamentary trust is conceptually close to a vested entitlement in an estate. An interest as one of a class of objects of a discretionary testamentary trust is quite different: the object has no entitlement to any part of the fund, only a right to be considered and a right to due administration of the trust. It may still be relevant as a financial resource where control, trustee and appointor powers and distribution history show the trust is realistically available — the analysis set out in our guide to family trusts in divorce and property settlements.

A mere expectation under a living person’s will, or possible intestacy. This is not an interest at all. A living person can change their will, spend their assets, remarry, lose capacity or outlive the expectant beneficiary. The point is developed in the next section.

A caution about value applies across all these categories. An interest in a deceased estate is worth what remains after estate debts, funeral and testamentary expenses, administration costs, tax including latent capital gains tax exposure, unsatisfied contingencies and any claim against the estate — and a family provision claim or challenge to the will can change both quantum and timing. Bringing an estate interest into a negotiation at gross face value is a common and expensive mistake.

Expectancies, privacy and disclosure

The most frequently misstated proposition in this area is that a spouse’s likely future inheritance can be taken into account because their parents are wealthy and elderly. It is not the law.

A mere expectation of inheriting from a living person is ordinarily neither property nor a financial resource. The reason is structural: a person of capacity may revoke or alter a will at any time, may spend or give away their assets, and may live for decades. An expectation that depends entirely on decisions another living person is free to change is not something the expectant beneficiary owns or controls. In White and Tulloch v White (1995) 19 Fam LR 696; (1995) FLC 92-640, a husband sought to have his wife’s anticipated inheritance from her elderly but healthy mother treated as a financial resource, and subpoenaed the mother’s will and financial records. The Full Court rejected that proposition on those facts, essentially because the wife could neither control nor be assured of the expectancy. Unusual facts can still make surrounding evidence relevant — the closer the facts come to an existing and reliably quantifiable interest, the more likely relevance will be established — but courts do not routinely speculate about testamentary decisions that remain capable of being changed.

The distinction to hold onto is between an existing vested or contingent interest, which is disclosable, and a bare expectancy, which ordinarily is not an interest at all. It is wrong to tell a separating party that they must routinely obtain and produce a living parent’s will.

The statutory disclosure duty is nonetheless serious, and since 10 June 2025 it sits in the Act itself. Section 71B (married parties) and section 90RI (de facto parties) require full and frank disclosure, in a timely manner, of all information and documents relevant to the issues, with a parallel duty while separated parties prepare for a proceeding. Critically, the duty is to disclose information known to the party and documents that are or have been in the party’s possession or under their control — which is why absolute claims about producing a third party’s documents are misplaced. Rule 6.06 of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 expressly requires disclosure of any vested or contingent interest in property, other financial resources, specified trust connections and disposals that may affect, defeat or deplete a claim; rule 6.17 sets out the consequences of non-disclosure. Subpoenas to third parties are limited and may be set aside. Disclosure and subpoena procedure generally is covered in our guide to financial disclosure and hidden assets.

Where there is an actual interest in a deceased estate, the relevant documents ordinarily include the will and any codicil, the grant, an inventory of assets and liabilities, estate accounts, correspondence with the executor, distribution statements, tax and cost-base records, and, for a testamentary trust, the deed and variations, financial statements, trustee resolutions and records of loan accounts or unpaid present entitlements.

When the inheritance was received

Timing is one of the most influential facts in an inheritance case, but it operates through the statutory considerations rather than through any rule.

Before the relationship

An inheritance received before cohabitation or marriage is assessed as an initial financial contribution. An initial contribution is not automatically eroded by the passage of time. Its relative significance is assessed in the context of the whole relationship: later financial, non-financial, homemaker and parenting contributions; changes in the value of the inherited property; how it was used and whether it was preserved; the length and course of the relationship; and the composition of the property ultimately available. A long relationship may make the overall assessment more complex, but it creates no presumption that the initial contribution has faded. Whether the asset can still be identified — the inherited house the parties never lived in, as against inherited cash that funded a deposit twenty years ago — usually matters more than the date itself. Initial contributions generally are dealt with in our guide to property owned before a marriage or relationship.

Early during the relationship

An inheritance received early in a long relationship often becomes deeply integrated: it pays a deposit, reduces a mortgage, funds a renovation or seeds a business. The recipient remains entitled to have that financial contribution recognised, and it is not discounted merely because time has passed; the other party will point to their own contributions since and the joint benefit both derived. The evidence that helps most is documentary.

Late during the relationship

A substantial inheritance received in the last year or two of a long relationship presents very differently: there has been little time for the other party to contribute to it or for it to be absorbed, and it often remains readily identifiable. Courts have frequently assessed such an inheritance distinctly from the balance of the property while still bringing it into the overall assessment and still considering each party’s current and future circumstances. What matters is the combination of size, recency, identifiability and the parties’ respective positions, not lateness alone.

After separation but before final orders

The answer has two halves. The inheritance cannot be treated as beyond reach: sections 79 and 90SM operate on the property of the parties at the time of the hearing, and Full Court authority confirms that after-acquired property is not to be described as excluded or immune and that how it is dealt with is discretionary. But the other party will ordinarily have made no contribution to it at all, which weighs in the recipient’s favour. The focus therefore shifts to the current and future circumstances considerations, which bite much harder where the remaining property is modest.

During litigation

An inheritance received while proceedings are on foot must be disclosed. The duty under section 71B or section 90RI runs until the proceeding is finalised, and a significant change in financial circumstances requires updated disclosure within the time the Rules prescribe. Dealing with the money quietly is the worst option available: the disposal is itself disclosable, and the consequences of non-disclosure include costs, adverse findings, contempt and dismissal.

After final orders, or under an agreement

An inheritance received after final property orders have been made and implemented is ordinarily the recipient’s own affair; finality is the point of final orders. An expected inheritance is also one of the most common reasons for making a binding financial agreement, which can identify inherited property or estate interests and provide how they, their proceeds, growth and any mixing are to be treated. Both topics are taken up below.

The factors that actually drive the analysis

• the length of the relationship and the course it took;
• the size of the inheritance relative to all of the property;
• the source and nature of the inheritance, including whom the deceased intended to benefit;
• whether the inheritance remains identifiable;
• what it was used for — the family home, a mortgage, living expenses, a business or investments;
• whether it has been preserved, depleted or grown in value, and why;
• the other party’s direct and indirect contributions, including to the care of the deceased or to the inherited property;
• each party’s current and future circumstances under section 79(5) or section 90SM(5); and
• whether the overall result is just and equitable.

No factual pattern guarantees an outcome and there are no standard percentages: two cases with similar-sounding facts can properly produce different results because the evidence differs.

What the leading cases show

A handful of decisions are cited constantly. Two cautions apply. Older authorities remain instructive where they are consistent with the amended Act, but the current statutory text governs — where commentary still refers to the former section 75(2) list, the equivalent considerations now appear in section 79(5) and section 90SM(5). And none of these cases creates a rule; they illustrate how the statutory considerations have been applied to particular facts.

Bonnici & Bonnici (1992) FLC 92-272 is cited for the proposition that a party will rarely be found to have contributed significantly to an inheritance received very late in a relationship, and still more rarely to one received after it has ended, absent unusual circumstances. It is often invoked as though it created a “late inheritance rule”. It did not, and it says nothing about the separate current-and-future-circumstances analysis or the overarching just-and-equitable requirement.

Bishop & Bishop (2013) FLC 93-553 is cited for the availability of an asset-by-asset approach where an inheritance was received shortly before separation in a long marriage, rather than a single global balance sheet. The point is one of method: separate treatment is one legitimate technique in an appropriate case, not a direction that inheritances must be dealt with that way.

Calvin & McTier [2017] FamCAFC 125 is the most useful modern authority on post-separation inheritances. The husband received a substantial inheritance some four years after separation, and the question was whether the trial magistrate erred in including it among the property considered. The Full Court held that the court has power to make an order in relation to after-acquired property, that the decision whether to do so is discretionary, and that no appealable error was established. The case stands against the idea that a post-separation inheritance is automatically off the table, and equally against the idea that it must be divided.

Holland & Holland [2017] FamCAFC 166 is cited for a related and now-codified point: it is wrong as a matter of principle to describe existing legal or equitable interests in property of the parties as “excluded” from, or “immune” from, consideration under section 79. That sits comfortably with the express direction in section 79(3)(a) to identify existing rights and interests, which admits of no exception for inherited property.

Elford & Elford [2016] FamCAFC 45 is not an inheritance case — it concerned lottery winnings a husband generated from his own funds and kept separately, which the Full Court did not treat as a joint contribution on those facts. It is relevant only by analogy.

White and Tulloch v White (1995) 19 Fam LR 696; (1995) FLC 92-640 is the authority for the expectancy point: a prospective inheritance from a living testator of capacity was not treated as a financial resource, because the expectant beneficiary could neither control nor be assured of it.

Two decisions outside family law complete the picture. Commissioner of Stamp Duties (Qld) v Livingston [1965] AC 694; (1964) 112 CLR 12 establishes that a residuary beneficiary has no beneficial interest in any specific asset of an unadministered estate, the right being a right to due administration. And Stanford v Stanford (2012) 247 CLR 108 remains the leading statement on the just-and-equitable requirement, now expressly located in section 79(2) and section 90SM(2).

As at the date of this article no appellate decision has been identified considering an inheritance specifically under the amended section 79 framework. The authorities above remain instructive but must be read against the current statutory text.

Keeping an inheritance identifiable

People often ask what they can do to keep an inheritance separate. There are worthwhile steps, but none makes an inheritance legally untouchable: the value of separation is evidentiary and practical, not protective.

• Separate accounts and records assist tracing and proof. An inheritance left in its own account can be identified and quantified without argument.
• Retaining inherited property separately may affect the contribution analysis. Where an inherited asset was never used for the parties’ joint purposes, the other party has a weaker case that they contributed to its acquisition, conservation or improvement.
• Separation of funds does not immunise the asset. An inherited asset held in a sole name, a separate account or a trust is still identified, still disclosable and still capable of being taken into account.
• Mixing does not automatically erase the contribution. If inherited funds went into the family home or a joint account, the recipient’s financial contribution remains a contribution under section 79(4)(a) or section 90SM(4)(a). What changes is the ease of proof and the weight the contribution is likely to carry.
• Preserve the records. Evidence assembled at the time is far better than evidence reconstructed years later.
• Do not deal with property to conceal, defeat or prejudice a claim. Such transactions are disclosable, may be set aside or restrained, and damage the credit of the party who made them.

Placing an inheritance in a trust does not “protect” it from a family-law claim, and an arrangement made after separation for that purpose is likely to attract close scrutiny. Treating a trust as a family-law shield is legally wrong and, on the evidence, counterproductive.

Current and future circumstances

A finding about contributions is not the end of the analysis. The court must also take into account the current and future circumstances considerations in section 79(5) or section 90SM(5). Several interact directly with an inheritance: age, health and the capacity to rebuild; income, property, financial resources and earning capacity; the care of a child under 18, including appropriate housing for that child; liabilities and self-support; responsibilities to support another person; and the economic effect of family violence, now addressed expressly. Access to resources that are not property — realistic access to a discretionary trust, for example — is also considered here rather than on the balance sheet.

Disparity in holdings is not itself a statutory basis for an adjustment. Where a contribution assessment would leave one party holding most of the property and the other with little, that disparity may be part of the factual picture, but any consequence must be anchored to an identified section 79(5) or section 90SM(5) consideration, or, where applicable, to another fact or circumstance the justice of the case requires to be taken into account, and then to the ultimate just-and-equitable assessment. Unequal holdings alone do not create an automatic adjustment.

One further discipline is essential: avoid double counting. If the recency of an inheritance is already reflected in a contribution finding, it should not be re-run as an independent circumstance. Our guides to current and future circumstances and to how contributions are assessed deal with each stage in detail.

Testamentary and discretionary trusts

Many wills now leave property to a testamentary trust rather than to a beneficiary outright, so what the beneficiary has is an interest in a structure rather than an asset. The questions that matter are whether the entitlement is fixed or discretionary; who controls, appoints and removes the trustee or can amend the deed; what the distribution history shows, which is usually better evidence of practical availability than what the deed permits in theory; whether there are loan accounts or unpaid present entitlements, which are existing rights with real value and frequently overlooked; whether genuine third-party interests exist, since a trust is not a party’s property merely because they are among its objects; and whether a foreign trust or estate raises questions of applicable law, foreign tax and proof. Depending on the facts a trust-related interest may be property, a financial resource, or neither.

The structural and trust-law analysis is not repeated here. See our guides to family trusts in divorce and property settlements, testamentary trusts explained and the taxation of testamentary trusts.

Executors, trustees and third parties

An executor or trustee does not become a party to the spouses’ property dispute merely because one spouse is a beneficiary, but they may be drawn in procedurally: disclosure or a subpoena for estate or trust documents, joinder where an interest in estate or trust property is genuinely in issue, or injunctive relief. Where a third party’s interests may be affected, procedural fairness is required.

Keep clear the distinction between restraining a spouse from dealing with property or an entitlement — an orthodox exercise of the court’s powers between the parties — and asserting an interest in estate property itself, a much larger step that requires a proper legal basis and runs into the principle that a beneficiary does not own particular assets of an unadministered estate.

An executor may properly delay or withhold a distribution while administration is being completed — identifying and paying debts and tax, resolving estate or family-provision claims, protecting creditors, obtaining appropriate indemnities or complying with a court order. A delayed distribution is therefore not, by itself, a breach of duty or a source of personal liability. What an executor must do is exercise their powers for proper estate-administration purposes, consistently with the will, statute and their fiduciary obligations. An executor cannot informally delay, redirect or manipulate a beneficiary’s entitlement merely to shelter it from that beneficiary’s family-law dispute; an arrangement of that kind may be examined in the proceeding and may be ineffective in any event. Where the parties genuinely wish to alter who receives what, that ordinarily requires a lawful mechanism — a valid deed, a disclaimer, a court order or similar — each with its own family-law, estate and tax consequences. Executors and trustees in this position should obtain their own advice, as should any other affected third party: their interests and the beneficiary’s are not the same, and one lawyer usually cannot act for both.

Where property has been dealt with to defeat a claim, section 106B may be relevant: it empowers the court to set aside or restrain a disposition made or proposed by or on behalf of a party that would defeat an existing or anticipated order, or which irrespective of intention is likely to do so. Relief is discretionary and depends on the evidence.

Final orders and financial agreements

Once property matters are resolved by final orders or a binding financial agreement, the law strongly favours finality.

A genuinely later inheritance does not itself reopen final orders. The grounds in section 79A (married) and section 90SN (de facto) are limited: broadly, a miscarriage of justice by fraud, duress, suppression of evidence including failure to disclose or false evidence; impracticability arising since the order; default; exceptional circumstances relating to a child that will cause hardship; and proceeds-of-crime orders. Orders may also be varied or set aside by consent.

The critical distinction is between a later event and an existing interest that was not disclosed. A party who receives an unexpected inheritance two years after final orders has experienced the former. A party who held a vested entitlement in an administered estate at the time of settlement and said nothing has created a real risk of the latter, because failure to disclose relevant information falls expressly within the miscarriage-of-justice ground. The grounds and procedure are examined in our guide to setting aside a property settlement.

Financial agreements are not reopened merely because an outcome later looks unfavourable. Sections 90K and 90UM permit a court to set an agreement aside only on limited statutory grounds — broadly, fraud including non-disclosure of a material matter, entry to defeat a creditor or another person’s interests, invalidity, impracticability, a material change relating to a child causing hardship, unconscionable conduct and certain superannuation matters. A subsequent inheritance is not a ground. That is why anticipated inheritances are often addressed expressly in a properly prepared agreement, which can identify inherited property and estate or trust interests and state how they, their proceeds, growth and any mixing are treated. No agreement can guarantee its own enforceability: the formal requirements must be met and both parties need proper independent advice. See our guide to binding financial agreements.

Tax, duty and value

Tax is where inheritance settlements most often go wrong, because balance-sheet figures can be misleading. What follows is brief; the detail belongs in our guide to tax and capital gains tax in divorce and property settlements.

• Inherited assets can carry latent CGT consequences. The cost base of an inherited asset turns on rules including when the deceased acquired it and whether it was their main residence. An inherited investment property or share portfolio may carry an embedded gain its market value does not reveal.
• Inheriting and later transferring are distinct events. What happened on death or distribution is one question; what happens when an asset is transferred between former partners under a settlement is another.
• The relationship-breakdown rollover is conditional. The rollover in Subdivision 126-A of the Income Tax Assessment Act 1997 (Cth) applies only where the statutory conditions are satisfied, which include that the transfer occurs because of a court order, a binding financial agreement or another instrument the provisions recognise. It does not apply merely because former partners agreed something informally.
• Liabilities, latent tax, disposal costs and duty are treated differently. Existing secured liabilities, such as a mortgage over inherited real property, generally affect net value. Latent capital gains tax, prospective costs of disposal (such as agents’ commission and conveyancing or sale-related legal costs) and any transfer duty that may arise on a proposed transfer or restructuring — which depends on the transaction, the jurisdiction and any available relief — are not automatically deducted. Their treatment depends on the evidence and on whether a disposal is inevitable, intended, likely or merely hypothetical, and tax may instead be taken into account in some other way where that is appropriate.
• Duty relief depends on the jurisdiction and the transaction. Relief for transfers on relationship breakdown has its own evidentiary requirements, and transfers involving an estate, trust or company do not necessarily attract the same treatment.
• Foreign estates raise further issues of foreign tax, withholding, exchange rates and proof of foreign law and administration.

The practical message: obtain coordinated legal and tax advice before implementation, and make sure the instrument effecting the transfer is the one the rollover and duty provisions require. Nothing in this article is tax advice.

Worked examples

These examples are hypothetical and simplified. No example describes a real client or case, and they illustrate competing considerations rather than predicted outcomes.

Example 1 — A modest inheritance used to reduce the mortgage

Anna and Ben were married for eighteen years and have two teenage children. Eleven years ago Anna inherited $70,000 from an aunt, which went into the offset account attached to the mortgage on their jointly owned home. The net property at separation is about $1.1 million. Anna kept the estate letter and the bank statements.

Anna made a documented financial contribution that conserved joint property, and it is not written off because a decade has passed. Ben points to eighteen years of contributions of every kind, the benefit both enjoyed, and the size of the inheritance against a pool of $1.1 million. The realistic issue is what weight the contribution carries, not whether Anna is repaid $70,000.

Example 2 — A substantial inheritance retained separately late in a long relationship

Carlos and Dana were together for twenty-four years. Fourteen months before separation Carlos inherited $900,000 from his mother’s estate, placed it in a term deposit in his sole name and never drew on it. The remaining net property is about $800,000. Dana was the primary carer of the children for many years, works part-time and is in her early fifties.

The inheritance is unmistakably identifiable, was received very late, and Dana made no contribution to its acquisition or conservation — a combination pointing strongly in Carlos’s favour on contributions, and which may support assessing the inheritance distinctly from the balance of the property. Against that, Dana’s age, part-time work, reduced earning capacity after years of caring and housing needs are express section 79(5) considerations; the difference in what each would hold is relevant as part of that picture rather than as a free-standing basis for an adjustment. Both sets of considerations must be taken into account and the overall outcome must be just and equitable. Keeping the money separate does not remove it from the analysis, but it makes the contribution case far easier to prove.

Example 3 — An inheritance received after separation but before final orders

Eva and Frank separated two years ago after a nine-year marriage. Proceedings are on foot. Six months ago Frank inherited $400,000 from his father; the relationship property is about $250,000. Frank disclosed the inheritance and filed updated disclosure. Eva has the primary care of their seven-year-old child and rents.

The inheritance is property of a party at the time of the hearing and must be identified; describing it as “excluded” would be wrong in principle. Eva made no contribution to it, which weighs heavily for Frank on contributions. But the relationship property is modest, Eva has the care of a young child and section 79(5) expressly directs attention to the need to provide appropriate housing for that child, and to each party’s income, property and financial resources. The likely focus is not whether the inheritance is “in” or “out” but what those considerations require and whether the overall result is just and equitable. Had Frank moved the money quietly instead of disclosing it, the disposal would itself have been disclosable and the consequences serious.

Example 4 — A possible future inheritance from a living parent

Grace and Harry are negotiating after a twelve-year marriage. Harry believes Grace stands to inherit substantially from her mother, who is 79, in good health and of full capacity. He wants the mother’s will and financial records produced and argues the expected inheritance is Grace’s financial resource.

Grace has no interest in her mother’s property at all. Her mother may change her will, spend her assets, require expensive care or outlive Grace. On orthodox principle a bare expectancy of this kind is ordinarily neither property nor a financial resource. Harry’s request also faces difficulties of relevance and forensic purpose and invites objection on privacy, oppression and proportionality grounds; Grace’s duty extends to information she knows and documents in her possession or control, not her mother’s private documents. Materially different facts — an existing vested or contingent interest — would change the analysis.

Example 5 — An unadministered estate and a testamentary trust

Isla’s father died eight months ago. Probate has been granted, but a commercial property is yet to be sold, the final tax position is unresolved and an adult sibling has notified a family provision claim. Under the will, Isla’s share is to be held in a discretionary testamentary trust of which she is one of several objects and her uncle is trustee. Isla and her former partner Jonah are negotiating a property settlement.

Isla does not own the commercial property or any other specific estate asset — while administration continues her right is a right to due administration. Under the testamentary trust she appears to be an object of a discretionary trust rather than the owner of a fixed share, so the enquiry concerns control, the trustee’s powers, distribution history, any loan account or unpaid present entitlement and whether her uncle is genuinely independent. Value is uncertain in any event. Isla must disclose her actual interests and the relevant documents within her possession or control, without asserting ownership of estate assets she does not own and without treating the structure as a reason to say nothing.

Practical checklist

1. Obtain advice before transferring or spending. Decisions made in the first weeks are often the hardest to undo.
2. Preserve estate and banking records. The will and any codicil, the grant, estate accounts, distribution statements, correspondence with the executor, and bank statements showing where the funds went.
3. Obtain current valuations where appropriate. Inherited real property, business interests and unusual assets need proper valuation, not an estimate.
4. Identify estate and tax liabilities. Cost base and latent CGT, outstanding tax liabilities of the deceased estate, unpaid debts and the costs of administration all affect what an interest is worth.
5. Disclose your actual interests accurately. Vested and contingent interests, financial resources and relevant trust connections are disclosable. If unsure whether something is an interest, ask rather than assume.
6. Do not conceal or dissipate property. Disposals that may affect, defeat or deplete a claim are themselves disclosable.
7. Consider interim arrangements if litigation is under way. Interim orders, undertakings or agreed arrangements about holding funds reduce risk on both sides.
8. Review your will, superannuation nominations and powers of attorney after separation. Separation does not by itself change these documents.
9. Formalise any agreement properly. A handshake or an email exchange does not achieve finality; valid consent orders or a properly prepared financial agreement do.

Time limits and formalisation

Divorce and property settlement are separate: a divorce order ends the marriage, does not divide property, and starts a clock. For married parties, section 44(3) requires property proceedings to be instituted within 12 months after a divorce order takes effect, except with the court’s leave or both parties’ consent. For eligible de facto parties, section 44(5) provides a standard period of two years after the end of the relationship. Leave under section 44(4) or section 44(6) is not automatic: it requires, among other things, satisfaction that hardship would be caused if leave were refused. An inheritance received after the period has expired does not create a right to apply late.

An informal agreement may not achieve finality: the other party may later apply, the transfer may not attract duty relief or the CGT rollover, and there is nothing to enforce. See our guides to consent orders, binding financial agreements and time limits for property settlement.

Related reading

• Property settlement after separation: a complete guide.
• How contributions are assessed.
• Current and future circumstances.
• Property owned before a marriage or relationship.
• Gifts and loans from parents.
• Family trusts in divorce and property settlements.
• Financial disclosure and hidden assets.
• Tax and capital gains tax in divorce and property settlements.
• Can a property settlement be reopened or set aside?.
• Testamentary trusts explained and the taxation of testamentary trusts.
• Deeds of family arrangement and estate asset transfers.

Frequently asked questions

Sources and further reading

• Family Law Act 1975 (Cth) — current compilation, including sections 44, 71B, 79, 79A, 90K, 90RI, 90SM, 90SN, 90UM and 106B.
• Family Law Amendment Act 2024 (Cth) — the amendments to the property framework, which commenced on 10 June 2025.
• Federal Circuit and Family Court of Australia — changes to the Family Law Act.
• Federal Circuit and Family Court of Australia (Family Law) Rules 2021 — including Chapter 6 (disclosure and subpoenas), rules 6.01 to 6.06, 6.17, 6.27 and 6.33.
• Federal Circuit and Family Court of Australia — duty of disclosure.
• Federal Circuit and Family Court of Australia — pre-action procedures for financial cases.
• Federal Circuit and Family Court of Australia — Practice Direction, financial proceedings.
• Federal Circuit and Family Court of Australia — property and finance: if you agree and if you cannot agree.
• Income Tax Assessment Act 1997 (Cth) — including Subdivision 126-A (relationship-breakdown rollover).
• ATO — how CGT applies to inherited assets and cost base of inherited assets.
• ATO — when the relationship-breakdown rollover applies and deceased estates.
• State Revenue Office Victoria — breakdown of marriage and domestic relationships: evidentiary requirements and deceased estates and duty.

How Parke Lawyers can help

Inheritance questions sit where family law, estates, trusts and tax meet, and advice from one discipline alone tends to be incomplete. Parke Lawyers acts for people who have received an inheritance, for people whose former partner has, and for executors and trustees drawn into someone else’s separation. We advise on characterisation and evidence, disclosure, the design of consent orders and financial agreements, and the tax and duty consequences of implementation, through our Family Law and Wills & Estate Planning teams.

Engaging us early is usually decisive: records are easiest to assemble at the time, and the choice between a cash adjustment and an asset transfer is easiest to optimise before anything is signed.