After a relationship breakdown, spouses have the right to divide their property. If the spouses are married, then the property division takes place in accordance with calculations in the Family Law Act. If the parties were not married, the property is divided on common law principles of property ownership and equitable principles of trust. Therefore, both married and unmarried couples have claims to property rights once the relationship breaks down. There are a variety of inheritance law options for receiving property depending upon the situation. With questions regarding your situation please get in touch with one of our knowledgeable attorneys for inheritance legal advice.
The FLA imposes an entirely new regime for the division of property. Generally, property brought into the relationship by a spouse, plus certain property acquired during the relationship such as inheritances, court awards and insurance proceeds, described as “excluded property,” will presumably remain the property of the owning spouse. Property acquired during the relationship, described as “family property,” will presumably be divided equally between spouses, along with the growth in value of each spouses’ excluded property.
Excluded property generally includes the following:
Gifts and inheritances will be excluded from a spouse’s net family property if they were received from a third person after the date of the marriage, and the donor must have expressly intended to give the gift or inheritance to the spouse alone, rather than to the family as a whole. Generally, any increase in the value of such gifts is not shared. If the gift or inheritance is not shareable, then if it is sold or transferred into another asset, that asset also belongs to the one spouse alone. In addition, any proceeds of sale of such excluded property or traced property should also qualify as excluded property.
In contrast, gifts or inheritances received before marriage are not simply excluded from the net family property calculation, but their value at the date of marriage is deducted from the spouse’s net family property, and the increase in its value will be subject to sharing.Gifts received from a spouse are included as part of net family property.
As with family property, the debts that either spouse or both spouses incurred during the relationship are divided equally between the spouses. After separation, spouses are responsible for their own debt that they continue to incur. However, family debt incurred by one spouse after separation is still divided equally between the spouses if the debt was incurred in order to maintain family property. Family debt is dealt with in section 86 of the Family Law Act.
In many cases, gifts from parents will not be subject to equitable distribution in divorce. While couples’ marital assets are subject to distribution, gifts will often qualify as “separate property,” and this means that they remain the sole property of the recipient spouse.
Gifts that qualify as separate property include:
In other words, if you received a gift from your parents at any time and it was clear that the gift was made only to you, the general rule is that the gift will qualify as separate property.
If you acquired a gift or inheritance before marriage that was appreciated during the marriage, then the value acquired during the marriage will need to be included in your net family property, because there is no special treatment accorded to gifts or inheritance received before the date of marriage. The pre-marriage value of a gift or inheritance will be deducted from your net family property like any other pre-marriage asset.
Normally, the part of a gift or inheritance received during marriage that still exists on the date of separation isn’t shared with the spouse if certain conditions exist:
If the property received by a spouse as a gift or inheritance during the marriage has ceased to exist by the family law valuation date, no exclusion can be claimed unless the property can be traced into other property which exists on the valuation date. No exclusion will be allowed if the gift or inheritance has been commingled with other assets or been used to purchase a matrimonial home.
Inheritance laws can be convoluted and, frankly, tough to understand, especially in the context of a divorce. If you would like to know more about inheritance and divorce, you may want to contact a skilled divorce attorney near you to discuss your specific situation.
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