Kiddushin 18A

וכאן שהורתו שלא בקדושה, ולידתו בקדושה.

And here it is referring to a case where he was not conceived in sanctity, i.e., his mother conceived him before she converted, and only his birth was in sanctity, as she converted when pregnant. It is appropriate to return money to this individual.

רב חייא בר אבין אמר רבי יוחנן: נכרי יורש את אביו דבר תורה, דכתיב: ״כי ירשה לעשו נתתי את הר שעיר״. ודלמא ישראל משומד שאני? אלא מהכא: ״כי לבני לוט נתתי את ער ירשה״.

Rav Ḥiyya bar Avin says that R' Yoḥanan says: By Torah law a non-Jew inherits from his father, as it is written: “Because I have given mount Seir to Esau as an inheritance” (Deuteronomy 2:5). The Talmud asks: But perhaps it is different with regard to an apostate Jew? In other words, it is possible that Esau was not considered a non-Jew but rather Jewish, like the Patriarchs. Consequently, he is categorized as an apostate Jew. Rather, the proof is from here: “Because I have given Ar to the children of Lot as an inheritance” (Deuteronomy 2:9), and the descendants of Lot were certainly non-Jews.

ורב חייא בר אבין, מאי טעמא לא אמר כרבא? מי כתיב ״וחשב עם קנהו ולא עם יורשי קונהו״?

The Talmud asks: And Rav Ḥiyya bar Avin, what is the reason that he did not state his opinion in accordance with the explanation of Rava, who derives the inheritance of non-Jews from the verse: “And he should reckon with his purchaser” (Leviticus 25:50)? The Talmud answers: Is it written explicitly in the Torah: And he should reckon with his purchaser and not with the heirs of his purchaser? This proof is based on an exposition, not on an explicit source.

ורבא, מאי טעמא לא אמר כרב חייא בר אבין? משום כבודו דאברהם שאני.

The Talmud further asks: And Rava, what is the reason that he did not state his opinion in accordance with the explanation of Rav Ḥiyya bar Avin? The Talmud answers: Perhaps due to the honor of Abraham it is different. It is possible that for the sake of Abraham an inheritance was given to the members of his family. The same may not apply to non-Jews in general.