An inheritance is a gift passed on to an individual when the original owner passes away. An inheritance can be a sum of money or it can be a tangible item such as a car or house.
Often times, individuals will draft wills that dictate how each asset is to be divvied up when they die. If an individual has not drafted a will, the state’s inheritance laws will govern. Usually, state law says that spouses, then immediate family will receive the assets and property of the deceased.
What is Marital Property?
In marriage, property of the spouses falls under one of two categories: community property and separate property. Community property is of marital property obtained during the marriage such as, wages and items purchased using marital funds, such as the marital home. Community property is owned jointly and shared equally by both spouses. Community property is usually divided between spouses upon divorce.
Separate property is personal items, gifts, money and property owned by either spouse prior to marriage. Gifts and inheritance received by one spouse during the marriage are separate property so long as they are never used to benefit the other spouse or marriage. For example, an inheritance is also considered separate property unless the spouse who received it combines it with community property.
Is Inheritance Considered Marital Property?
Gifts and inheritance received by one spouse during the marriage are separate property so long as they are never used to benefit the other spouse or marriage. For example, an inheritance is also considered separate property unless the spouse who received it combines it with community property.
Not every asset or piece of property owned by a spouse becomes the joint property of the other spouse.
Separate property belongs to just one spouse. An inheritance is one such example of separate property. It does not matter if the inheritance was received before or during the marriage. The other spouse does not have any right to this inheritance during life or after death.
However, an inheritance could be marital property if the couple inherited the property together. In addition, the spouses could decide to state in a marital property agreement that a sum of money or property inherited by one spouse is the joint property of the couple.
Can Inheritance Turn into Marital Property?
Yes, inheritance can turn into marital property when the spouse commingles the inheritance money with community property or marital assets. For example, if a spouse takes inheritance money received and places into a joint account, then it will become community property.
Also if a spouse takes inheritance money and purchases a family home with both spouse names on it then the house that was purchased by inheritance money is community property or marital property.
If an inheritance is received during the course of marriage, the court will look at a number of things including to determine if the inheritance is intended to be separate property or community property such as: if only one spouse was named as the beneficiary of the inheritance in the will, whether or not the inheritance was held in an account separate from marital funds, whether or not the inheritance was used to purchase marital property such as a family home or car, if the inheritance money ever commingled with marital property, and if so, what type of asset the inheritance was commingled with.
How Can I Keep My Inheritance from Turning into Marital Property?
To avoid turning inheritance money into marital property, a spouse should avoid commingling funds with marital property and should keep it separate in all accounts. Keep all inheritance money received in a separate account under own spouse’s name and not in a joint account because it will prove that your intent was to keep the inheritance and separate property.
If a spouse shares a portion of his inheritance, it is generally presumed he meant to share all of the inheritance money with the spouse. The spouse may also have to prove that sharing the entire inheritance was not his intent.
You can also enter into an agreement with your spouse prior to marriage or during marriage that states the specific inheritance in questions is intended to be separate property of the receiving spouse and not intended to become marital property. All you have to show the court is intent
How Can I Prove Inheritance was Separate Property?
In order to prove that the inheritance that you received was separate property in a divorce, you would have the burden of proof to convince the court that you intended it to be separate, despite any mistakes you might have made in handling it.
Provide evidence that you commingled the inheritance money into marital assets on mistake and you did not intend to commingle the funds with marital property.
Do I Need a Lawyer for Divide Up Marital Property?
Family law and the distinction between community property and separate property can be very confusing. If you want to protect your assets or property or if you want guidance on how to draft a marital property agreement, you should consult with a lawyer. An estate lawyer has experience with marital property agreements and can advise you on how to best divide your marital property.