Receiving an inheritance during your relationship

Relationships can be complicated waters to navigate at the best of times, but it can become even trickier when thought needs to be given to relationship property matters. 

One such thorny issue is when one person receives an inheritance or other significant gift from a third party. For a variety of reasons, it may be important for that inheritance to be kept separate from other property of the relationship. This article focuses on the complications of keeping it separate.

Relationship property and intermingling

In most cases, after three years in a relationship, all property acquired during that relationship will be classed as relationship property to be divided equally between the couple if their relationship ends (either by separation or death).

Property that each person owned before the relationship is separate property and does not get divided with the other person. Inheritances or other gifts received during the relationship are, in most situations, also separate property and are not divided.

Separate property can, however, become relationship property in a variety of ways during the relationship. In the case of an inheritance, this happens when that property is ‘intermingled’ with other relationship property with the express or implied consent of the owner. The law says that the intermingling needs to have had the effect of making it too difficult or impractical to continue to identify the portion of separate property.

How this can happen

The most common example of intermingling occurs when money is inherited. If the money is deposited into a joint or other relationship bank account and other money is going in and out of that account, it can be very difficult to identify what part of the funds left in that account are still inheritance funds.

Another example is when inheritance funds are used to buy assets for family use or pay relationship debts. 

In both examples, the inheritance could well be regarded to have been intermingled with the express or implied consent of the inheritance recipient. The inheritance would become relationship property.

Another common issue is when a party intends to keep an inheritance separate by putting it into a separate account (in their own name) but also uses that account to receive money that would be classed as relationship property, such as income. The inheritance may be regarded as intermingled with relationship property because income generally is a relationship property asset, despite the income being received into a separate account. Ultimately, however, each case will depend on its own facts.

While inheritances often take the form of cash, the same principles apply to a house or any other type of property that has the potential to be intermingled. In the case of a house, although it is usually easily identifiable as the source of the inheritance, that might change if significant renovations are undertaken by both parties to the relationship, or if the house is sold and the money received from the sale is intermingled with other relationship money. 

Protecting inheritance

If you know you are going to receive an inheritance and you wish to protect it, it is important that you get professional advice to discuss how the inheritance might be used and how it can be best protected. The best option for you will depend entirely on your circumstances and plans for the inheritance. Some common protections include:

  • Keeping the inheritance completely separate either in a bank account set up for that purpose or in a separate investment in your sole name
  • Establishing a trust to hold the inheritance and keep it separate from your relationship, or
  • Having a contracting out agreement (prenup) prepared that sets out your separate property and the relationship property, and how all of that property would be divided if you separate or when one of you dies. These agreements can be entered into at any stage of the relationship.

No option is completely fool proof and each option has its own pros and cons.

If you are expecting an inheritance, or have recently received one, it can be a delicate topic to bring up with your spouse or partner. You may of course be perfectly happy to intermingle inherited property. It would, however, be prudent for you to talk first with us to discuss the options above and any implications that may bring to your relationship.

Related Articles
property inheritance
Receiving an inheritance during your relationship

Relationships can be complicated waters to navigate at the best of times, but it can become even trickier when thought needs to be given to relationship property matters.

Read More
bank mum dad
The Bank of Mum and Dad

Lending money to your children to buy their first home can be a generous and life-changing move, but it’s essential to consider the legal implications before proceeding.

Read More
Who really wants to be a trustee?

The Trust Act 2019 outlines the obligations of trustees, and when taking on a trusteeship an individual or company must be aware of the risks involved.

Read More
innovationagriculture energya tractor powered by livestock manure
Rural eSpeaking Summer 2022

Trusts and succession

Read More
istockphoto 1311594965 612x612
Commercial eSpeaking Summer 2023

Letter of Intent

Read More
greenwashing.jpeg 1
Fineprint Summer 2022


Read More
couple arguing
Property eSpeaking Summer 2022

Negative equity on your property?

Read More
istockphoto 1193076990 612x612
Commercial eSpeaking Spring 2022

Contract Compliance

Read More
Employment Investigations


Read More
Off the Record Episode 5 Jayne cover 1000
Off the Record - How will the new housing density rules affect Queenstown?

Read More
old couple smiling at computer
Trust eSpeaking Spring 2022

Trusts Act 2019 also affects executors and administrators of wills

Read More
Whats the Difference Between a Debtor and a Creditor
Fineprint Winter 2022

Creditor compromise regime: Another option in insolvency Guest editorial: The economy - tougher times ahead? Love, heartbreak and...death? Make a new will and EPA's when you separate New Incorporated...

Read More
podcast remarkables3
Off the Record - How to Survive a Legal Dispute

Read More
Commercial eSpeaking Winter 2022

2022 Budget

Read More
podcast remarkables2
Off the Record - Can your business handle divorce?

Senior Associate Scott Donaldson and Senior Solicitor Alice Milne have released episode 3 of their podcast, Off the Record.

Read More
podcast remarkables
Off the Record - A New Era for Directors' Duties

Senior Associate Scott Donaldson and Senior Solicitor Alice Milne have released episode two of their podcast, Off the Record.

Read More
etf investment guide theme wood
Rural eSpeaking Autumn 2022

He Waka Eke Noa

Read More

Duncan Anderson, Associate, Mactodd Lawyers, Queenstown

Read More
Off the Record - Fair Pay Agreements

Senior Associate Scott Donaldson and Senior Solicitor Alice Milne have started a new video podcast where they address issues in law affecting Queenstown businesses.

Read More
Fineprint - Autumn 2022

Mental health in the workplace Co-ownership arrangements Checking your home is accurately insured Helping your family before you pass away Notifications of privacy breaches increase significantly Post script

Read More
2E064F28 C892 43AD 8F60 BC43E5BE2D68
Commercial eSpeaking Summer 2022


Read More
happy couple
Fineprint - Summer 2021

- Defining a de facto relationship

Read More
ricardo gomez angel z6CcN8rlftY unsplash2

Mann v Paterson Constructions Pty Ltd—Builders' Quantum Meruits Revisited' (2021) 37 Construction Law Journal 207 discusses recent changes to the law in Australia regarding restitutionary claims able to be made...

Read More
Looking at house plans
Fineprint - Winter 2021

Buying off the plans New edition of To Trust or Not to Trust Climate Action Toolbox Post-Covid working world An independent trustee Postscript

Read More
download 1 jpeg
Rural eSpeaking Autumn 2021

Rural Leases - Should be more specific

Read More
Rural eSpeaking - Summer 2020

Investment in Farming - A focus on syndicated farm investments The finite supply of water - Water easements Over the Fence - Crown Pastoral Land Reform Bill (submissions open),...

Read More
remote working
Commercial eSpeaking - Spring 2020

Read More
carbon footprint
Fineprint - Winter 2020

Read More
Wellbeing Budget 2020 Image 1080x675
Commercial eSpeaking - Winter 2020

The government’s Budget, presented by the Minister of Finance the Hon Grant Robertson on 14 May has addressed, in the words of the Minister, “a 1-in-100 year health and economic...

Read More

Read More
Home Buying, Selling & Moving Checklist

These helpful checklists will guide you thought some of the most important areas you and your lawyer need to address when purchasing or selling a residential property and also when moving.

Read More
on the move logo2
On The Move - A Practical Guide For Buying & Selling Your Home

Also includes comprehensive checklists to you don't miss out any important step as well as details on how to protect your assets and when you also need to consider a...

Read More
handing over keys
Australian Guide To Buying Property In NZ

Not all investments in NZ require consent from the Overseas Investment Office (“OIO”) but like many countries NZ has controls on overseas investment. Certain land is subject to OIO consent.

Read More
family trusts4
Family Trust Guide

This practical guide designed to steer you through the essentials of Family Trusts including: Is a family trust for you? Protection given by a Family Trust. Planning for your life. Duties of trustees and how to run a trust. Costs.

Read More
road to glenorchy small2
Guide To Buying Real Estate In New Zealand

Our local knowledge, experience and expertise will provide you with the support and advice you need for a successful property purchase, regardless of the size or complexity of the transaction.

Read More
chinese buyers
Chinese Buyers Guide To Buying Property in NZ

We have produced a practical guide on buying a home or an investment property in New Zealand in Mandarin.

Read More
wills estates2
Estates Booklet - The Closing Chapter

You’re catapulted into thinking about organising a funeral, whether it will be a cremation or burial and how to organise the day, and then you also need to think about...

Read More
Be the First to Know
Something for Nothing

Stay up to date with our latest News, Views & Resources by subscribing to our newsletter. We promise to provide you with quality content & the latest industry news.