Below, our friends from Vayman & Teitelbaum, P.C. discuss inheritance, divorce, and property division.
What’s Truly Separate Property?
Divorce can stir up a whirlwind of emotions and a host of complex legal questions. One of the most common concerns couples face is what happens to property and assets when they separate, especially when one spouse has received an inheritance. Is inherited money automatically considered separate property in a divorce? And what happens if those funds are mixed with joint assets?
Understanding how inherited assets are treated under family law can help you make informed decisions and protect what’s rightfully yours.
What Is Separate Property?
In general, property falls into two main categories during a divorce: marital (or community) property and separate property. Marital property includes income and assets acquired by either spouse during the marriage, while individual property includes assets acquired before the marriage or received individually through a gift or inheritance.
This means that, yes, inheritance is typically considered separate property. If your aunt left you a house or your grandfather left you a lump sum of money, and it was designated solely for you, that inheritance begins as your separate asset.
But there’s a catch.
When Inheritance Becomes Marital Property
Even though an inheritance begins as separate property, it can lose that protection through a process called “commingling.” If the inherited asset is mixed with joint marital funds or used in a way that benefits the marriage, it may no longer be considered separate.
- Here are a few common examples of how this happens:
- Depositing inherited money into a joint bank account
- Using inheritance funds to make improvements on a jointly owned home
- Using inheritance to pay for shared debts or family expenses
Once these funds are mixed or used for marital purposes, it becomes challenging, if not impossible, to distinguish what’s yours from what belongs to both spouses. In the eyes of the court, that commingled asset might now be considered marital property and subject to division.
Protecting Your Inheritance
To keep an inheritance as separate property, it’s crucial to take the proper legal and financial steps:
- Keep inherited money in a separate account in your name only
- Avoid using inherited funds to pay for marital expenses
- Document everything. Keep records showing the source and how the funds have been used or invested.
- Consider a prenuptial or postnuptial agreement that outlines explicitly how inheritance will be handled in the event of a divorce.
Taking these precautions may not be romantic, but they are practical. They ensure that your inheritance is treated with the legal clarity it deserves.
What About Property Purchased With Inheritance?
Let’s say you use inherited money to buy a car, a house, or make a significant investment. Is that property still separate?
It depends.
If the purchase was made in your name alone and the funds can be traced back to the inheritance, it may still be considered separate. However, suppose the property is titled jointly or has been used by both spouses. In that case, it may be regarded as marital, especially if the non-inheriting spouse contributed to its maintenance or increase in value.
Family Law Attorney
Navigating the fine line between separate and marital property can become complicated quickly. If you’re facing a divorce and concerned about protecting your inheritance, don’t guess. Talk to an experienced family lawyer who can help you understand your rights, gather documentation, and advocate for what is legally yours.
