Is an Inheritance Marital Property?

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 What is an Inheritance?

An inheritance is a gift which is passed to a recipient when the original owner passes away. An inheritance may include tangible items, such as homes or vehicles, or it may include sums of money, or even a combination of the two.

In many cases, an individual will draft a will that dictates how each of their assets will be divided up and distributed when they pass away. If the individual has not drafted a will, the inheritance laws of the state will govern the distribution of property.

Generally, state laws provide that spouses are first in line to inherit assets and property. This is followed by immediate family.

What is Marital Property?

Marital property is that property which married individuals share during their marriage. It may include real property or money. Property of spouses will fall into one of two categories, community property and separate property.

Community property is that marital property which was obtained during the marriage and may include income earned and items which were purchased using marital funds, such as the marital home. This property is jointly owned by the spouses and is shared equally.

Typically, community property is divided evenly between the spouses in the event of a divorce. In contrast, separate property includes property which is owned by one of the spouses prior to the marriage.

Separate property may include:

  • Personal items;
  • Gifts;
  • Money; and
  • Property.

States which recognize community property usually split marital property evenly between the spouses in the event of a divorce. These states assume that any property acquired during a marriage is community property.

In these states, a spouse claiming that property is separate has the burden of proving such. States which have community property laws include:

  • Arizona;
  • California;
  • Idaho;
  • Louisiana;
  • Nevada;
  • New Mexico;
  • Texas;
  • Washington; and
  • Wisconsin.

Inheritance and gifts which are given specifically to one spouse during the marriage are separate property as long as they are not used to benefit either the marriage or the other spouse. For example, an inheritance of money is considered separate property unless the receiving spouse combines it with community money of the marriage to purchase the marital home.

Property which is generally considered to be separate includes:

  • Inheritances and gifts;
  • Heirlooms or other valuable items to be kept in the family, such as jewelry;
  • Property that is used principally or wholly for business purposes;
  • Property acquired under a trust;
  • Property which has been declared separate pursuant to an agreement, such as a prenuptial agreement; and
  • Property obtained with the proceeds of another separate property that is not intended for the use or benefit of both spouses.

Is Inheritance Considered Marital Property?

As previously noted, inheritance and gifts that are received by one spouse during a marriage remain separate property so long as they are not used to benefit the marriage or the other spouse. An inheritance is considered separate property unless the receiving spouse combined it with community marital property.

When individuals marry, not every piece of property or asset owned by one spouse becomes the joint property of the other spouse. Although they married, a spouse’s separate property belongs to just them.

An inheritance given to one of the spouses is an example of separate property. Whether that inheritance was received prior to the marriage or during the marriage has no bearing on it being separate property.

The other spouse has no right to such an inheritance either during their life or after their death. However, an inheritance may be considered marital property if the spouses inherited the property jointly.

In addition, an inheritance could be considered community property if the court states in a marital property agreement that property or money inherited by one spouse is to be considered joint property of the couple.

Can Inheritance Turn into Marital Property?

Yes, it is possible for an inheritance to turn into marital property. This may occur when a spouse commingles the inheritance money or assets with other community property or marital assets.

For example, if one spouse places inheritance money into a joint bank account, it then becomes community property. In addition, if the spouse takes their separate inheritance money and purchases a family residence which has both of the spouses’ names on the deed, then that home which was purchased with inheritance money becomes community property, or marital property.

If an inheritance is received during a marriage, a court will examine a number of factors in order to determine if that inheritance was intended to be separate property or community. These factors may include:

  • If only one spouse was named as a beneficiary of the inheritance in a will;
  • If the inheritance was held in a bank account separate from marital funds;
  • Whether the inheritance was used to purchase marital property, such as a family home or vehicle; and
  • Whether the inheritance money was ever commingled with marital property and, if it was, what type of asset the inheritance was commingled with.

How Can I Keep My Inheritance from Turning into Marital Property?

There are ways in which a spouse can keep their inheritance from becoming marital property. In order to avoid this, the spouse should not commingle funds with marital property and should keep those funds in a separate account.

If the spouse wishes to keep an inheritance separate, they should keep the money received in a separate bank account under their own name alone and not in a joint bank account. This will prove that the spouse’s intent was to keep that inheritance as separate property.

It is important to note that if a spouse shares a portion of their inheritance, it is typically presumed that they meant to share all of the inheritance money with their spouse. The spouse who received the inheritance may be required to prove that it was not their intent to share the entire inheritance.

Another way to avoid turning an inheritance into marital property is to enter into an agreement prior to marriage or during the marriage. The agreement should state that the specific inheritance is intended to be separate property of the receiving spouse and is not intended to become marital property. The receiving spouse simply has to prove their intent to the court.

How Can I Prove an Inheritance was Separate Property?

In order to prove that the inheritance which a spouse received was separate property in the event of a divorce, they would have the burden of convincing the court that they intended the property to be separate, despite any mistakes the spouse may have made in handling the property or funds. The spouse may be able to provide evidence that they commingled the inheritance money into their marital assets by mistake and they did not intend to commingle those funds with any marital property.

If the funds or property were kept in the inheriting spouse’s name and in a separate bank account, that can also be proof of the intent to keep the property separate.

Do I Need a Lawyer for Divide Up Marital Property?

It is important to have the assistance of an estate lawyer for the division of marital property. Both family law and the distinction between separate property and community property may be overwhelming, especially if you are facing a difficult emotional time such as a divorce.

Your attorney can help you protect your property or assets using a marital property agreement either before or during your marriage. If you are facing a divorce, your attorney can help you show that the property was intended to be separate, attempt a settlement with your ex-spouse, and represent you any time you have to appear in court.


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