One of the most complex aspects of divorce is figuring out how to divide marital assets between you and your spouse. However, before you even get to this step, you first have to determine what is subject to that division. There are likely assets that you owned before the marriage that you expect to keep, as well as assets your spouse owns that they expect to keep. Dealing with an inheritance can be particularly tricky and contentious if they are valuable. Inheritances are handled differently depending on when you receive them, how they are used, and the state where your divorce takes place.
Is A Spouse Entitled To Inherit Assets Acquired Before Marriage?
In some situations, a spouse may enter a marriage with inheritance proceeds. The question then becomes, “Does an inheritance have to be shared with a spouse?” State law determines the effect of divorce and inheritance proceeds that were obtained before marriage.
Generally, property that a spouse owns before marriage, such as personal property, real estate, a checking account, an inheritance, or a gift is considered their separate property and is not subject to division during a divorce.
But, is a spouse entitled to inheritance money ever? Maybe.
A spouse may become entitled to inheritance money if the spouse who receives it voluntarily shares it with their spouse or if they commingle it with marital property. This topic is discussed in more detail below, but just know that if you mix your inheritance property with your marital property like depositing funds into a joint account or moving into a home you inherited with your spouse and then making repairs to it, your spouse may now have a right to a portion of the property.
If you don’t commingle the inheritance proceeds with marital assets, you will generally be able to keep all of the inheritance yourself without having to split it during the divorce.
Is A Spouse Entitled To Inheritance Assets Acquired During Marriage?
Property you acquire during your marriage and money you earn are generally considered marital property. This property is split when a divorce occurs. However, money that you inherit during a marriage is treated differently than other sources of money you receive during the marriage. Generally, assets you inherit directly at any point are generally considered by the courts to be separate property. You are usually the sole owner. You usually do not have to split these funds with anyone, including your spouse.
As stated above, these are the “general” rules. However, to answer the question “Is an inheritance marital property?” you will have to get into the specifics.
First, you will need to look at how the inheritance was structured. Were both you and your spouse recipients of the property? For example, did your parents give you money to fix or add onto your marital home? Were both you and your spouse expected to benefit from this gift? If so, the inheritance may be considered a marital asset, and the inheritance can be split in a divorce.
The next question that you must ask is whether you and your spouse had any prior agreement regarding an inheritance and marital property. For example, you may have a prenuptial or postnuptial agreement that states that the inheritance is separate property. Alternatively, your agreement might state an inheritance is marital property. While divorce will typically only deal with marital assets, you and your spouse may voluntarily decide to include the inheritance in your divorce settlement.
Finally, to determine if an inheritance is marital property, you will have to look to how it was used during your marriage. Did you use the funds on your marital property and now your spouse is entitled to a portion of the increased value of your property? Again, if you commingle your inheritance property with marital property, the inheritance may lose its identity as separate property.
This analysis applies to property you acquired as part of an inheritance, as well as to property you received as a gift while the donor was living.
Is An Inheritance Community Property?
A few states are considered “community property” states. In these states, courts generally divide property 50/50, regardless of who earned the property. Property is classified as either community property or separate property, with community property having to be shared equally and separate property going only to the sole owner of it. Like in “equitable distribution” states, inheritances are usually considered separate property.
Commingling & Transmutation vs. Separate Property
Whether you receive an inheritance before or during your marriage, if your separate inheritance becomes part of your “marital estate,” you risk losing it. The most common way this happens is that the person who receives the inheritance commingles it with jointly held property. If the inheritance was used to benefit both you and your spouse, it has likely taken on another form or “transmuted” to marital property. If this occurs, it is no longer considered separate property and is fair game in the divorce.
Some examples of when property may be commingled and transmuted include:
- You put inheritance money into a joint bank account and use it to pay for household expenses, like the mortgage, utilities, and car payments for both you and your spouse
- You put your spouse’s name on the deed of a home
- You put your spouse’s name on the title of a vehicle
- You sold property your family left you and used the proceeds to make renovations to a home you own with your spouse
Can My Ex-Spouse Claim A Future Inheritance?
Generally, a spouse cannot claim a future inheritance that you have not received at the time of your divorce unless your divorce decree specifically addresses this issue. However, some courts may consider prospective assets that the couple is likely to acquire in the foreseeable future when allocating marital property. For example, if your spouse is supposed to get a bonus, the court may consider these additional funds even though he or she has not received the bonus. The same may occur if it is likely that one of you may be receiving an inheritance in the near future. Additionally, most wills can be freely revoked at the testator’s whim, so there’s no guarantee that a person will receive an inheritance, even if they might be expecting one. So, can a future inheritance be claimed in a divorce? Possibly, but it is unlikely.
Effects of State Laws
It is important to keep in mind that state laws vary. Some states are reluctant to recognize separate property and may assume that all property is marital or community property. Some states like New Hampshire may consider an inheritance to be divisible in the event of a divorce. Each state’s divorce laws will determine how an inheritance can affect divorce.
To get a court to consider the inheritance separate, you may have to prove this to the judge’s satisfaction. Some ways to prove this may include:
- Providing the original will or other document that gave you the inheritance
- Showing the court a valid pre- or post-nuptial agreement between you and your spouse
- Providing clear tracking of your inheritance
- Showing that you never commingled your inheritance with marital assets
- Financial statements and tax returns concerning your inheritance
Other Ways an Inheritance Can Affect Divorce
Besides the possibility of splitting the inheritance, there are other ways that an inheritance may affect your divorce. For example, in equitable distribution states, the court can look at your separate property when determining how to divide marital property. If the court believes that you are in a better financial situation than your spouse because of the inheritance, the judge may award more valuable marital assets to your spouse.
Additionally, an inheritance may affect a spouse’s spousal or child support obligations. If your spouse receives an inheritance after your divorce and the divorce decree does not address this, you may be able to request a modification of the support order if your state views the inheritance as grounds for this type of action.
Protecting Inheritance From Your Spouse
If your divorce has not been decided or you have not received your inheritance yet, you may still have ways to protect your inheritance, such as:
- Keeping your inheritance in a completely separate account and never mixing it with marital property
- Saving documentation related to the receipt of these funds and their intended use
- Entering into a valid postnuptial agreement
- Placing the inheritance into a trust with you as the beneficiary
The best action to take is to consult with a family lawyer who is knowledgeable about this subject who can offer you clear advice about how to protect your inheritance from your spouse.
