Money inherited by one spouse during a marriage is generally treated differently than other money that comes into a marriage. Typically, when one spouse earns money during a marriage, that income is the property of both spouses. However, with inheritances, whether both spouses are entitled to part of the money will depend on a number of different factors. If you are expecting an inheritance or have received an inheritance and are considering divorce, you will want to talk with a knowledgeable attorney to help you protect the property.
Separate and Marital Property
One of the major concepts in divorce law is the difference between marital property and separate property. Marital property is property that is jointly owned by the couple. Separate property is owned by only one of the spouses, and thus is not subject to division during a divorce. Most of the assets that are acquired by either party during a marriage are automatically considered marital property. Inheritances are separate property provided that the property is kept separate.
However, state laws vary. Some states are reluctant to recognize separate property in the majority of situations. If you are married and expecting an inheritance and want to keep it separate, it is important to speak with a skilled attorney who can help you understand the laws in your state.
A big issue that can come up with inheritances is commingling. Separate property can become marital property if it is commingled with marital property. For example, if you are left an inheritance and you put in in a separate bank account in your name only and you use it only for personal expenses or personal investments, it will probably still be considered separate property. However, if the inheritance money is put into a joint bank account and used for household expenses for the couple, such as mortgage or car payments for jointly owned cars, then it may be considered commingled.
Conversely, marital property that is deposited in a separate property account can also change the characterization of the separate property into marital property. While separate property can easily become marital property, it does not work the other way around. Separate property that is commingled with marital property thus becomes marital property. If the inheritance becomes marital property it will be subject to division upon divorce.
It is also possible for some of the funds to keep their characterization as separate property and some to become marital property. A large part of the inquiry will depend on the intentions of the party. However, courts often require a lot of proof when one spouse is trying to prove that the funds should be considered separate and not be divided.
Proving Separate Property
There are several things that parties can use as evidence to show that the property should continue to be considered separate property. One of the safest ways to make sure that your inheritance remains only yours is through a pre- or post-marital agreement. These agreements can lay out any understandings about marital and separate property. It is also important that you save any documentation that you have about bank accounts, investment accounts, and/or tax returns. You can use these documents as proof of the intention of the donor to give the gift to only one spouse, as well as the intention of the parties to maintain the assets as separate property.