Ex Files with Jeremy Sutton: How to protect your inheritance during relationship troubles

Inheritance and separation — what you need to know. Photo / 123rf

My wife and I have been going to counselling as our relationship hasn’t been going well for some time. I don’t know if we are going to separate or not, but I am about to receive $275,000 from my mother’s estate and I want to be able to keep this if we were to separate. What can I do?

Under the Property (Relationships) Act 1976 the property you and your wife own is classified as either separate or relationship property. Generally, your relationship property will be divided 50:50 and you each get to keep 100% of your respective separate property.

The starting point

As a starting point, inheritance is separate property. However, if inheritance is intermingled with relationship property it can lose its separate property status. This can happen if inherited funds are paid into a joint account where there are the usual income and expenses flowing.

Advice

The best thing you can do to protect your inheritance is to open a new bank account and have the inheritance paid into that account.

No other transfers should be made into the account to ensure there is no intermingling with any relationship property funds, and it is important to be aware that any money you transfer out of that account or spend could lose its separate property status.

Repay the mortgage

If there is something you want to use the inheritance for, such as repaying a mortgage, then the best course is to discuss this issue with your wife and enter into a contracting out agreement prior to using the inheritance. An agreement could record that in the event of a separation you are to be reimbursed for the inheritance you introduced into the relationship property pool.

Summary

You will each need to see a lawyer to enter a binding contracting out agreement as there are particular rules which apply. It is not sufficient for you to agree this between yourselves, even if you put it in writing.

Jeremy Sutton’s advice is of a general nature, and he is not responsible for any loss that any reader may suffer from following it. He does not consider your individual situation. Before you make legal decisions, should always get independent advice from a specialist lawyer.”