When Wills and Relationships Collide: Navigating the Overlap of Estate Administration and Family Law

In family law property settlements, the Federal Circuit and Family Court of Australia (‘FCFCOA’) often considers whether an inheritance under a will should be treated as the property of a party or as a potential financial resource. A key factor in this determination is the timing of the inheritance—whether it was received before, during, or after the separation. The Court also considers whether there is knowledge of a future inheritance, either imminent or distant. The increasing use of Discretionary Testamentary Trusts in wills has added complexity to these considerations. Testamentary Trusts can aim to keep inherited assets separate from a marital asset pool, however the FCFCOA has broad powers to interpret whether they are property of the parties or financial resources. In the case of Bernard v Bernard [2019] FamCA 421, the Court held that the husband’s interest in his late father’s estate, held via a discretionary testamentary trust, constituted a financial resource. The husband was neither the settlor nor the trustee of the trust established pursuant to his late father’s will. He was classified as a discretionary beneficiary, and the trust assets were not considered matrimonial property, as they were not acquired during the marriage. This matter illustrates how such trusts can influence the outcome of property settlements and the importance of the terms of the trust deed and how it operates. While estate administration and family law obligations overlap in some areas, the duty of disclosure differs between them. Family lawyers may request estate documents from estate solicitors to support property settlement matters. Beneficiaries or interested parties often make informal requests for documents such as: • A copy of the Will • A statement of assets and liabilities • Updates on the progress of estate administration • Financial information relevant to family provision claims When inheritance is not imminent, and such requests are made informally, the rules around disclosure and discovery can be ambiguous. If the FCFCOA issues a subpoena, compliance is generally mandatory. However, if the request is made informally, such as through solicitor correspondence, it is prudent to seek clarification before providing information. Conversely, if an inheritance is imminent, full disclosure is required in the context of property settlement. This includes providing the Grant of Probate and other relevant financial documents. Understanding the interaction between estate planning and family law is crucial in navigating the complex issues of inheritance and property division. For more information on how this is relevant to your matter, and what it means for you, please contact us at Swan Family Lawyers on (08) 8227 1970.