Handling Inheritance Assets in Divorce 9

Inheritance received by either spouse during the marriage is generally considered separate property. There are some circumstances, however, in which an inheritance might ultimately be considered marital property under state divorce law.

Tip: When considering how to divide the marital assets and debts during a divorce, you need to know which of your assets and debts are considered marital and which are considered separate (regardless of whether your state follows community property laws or equitable distribution laws). This is important because marital assets are subject to division; separate assets are not.

Separate Property vs. Commingled Assets

Because inheritances are treated as separate property belonging to the person who received the inheritance, those assets may not be divided between the parties in a divorce. If the funds are commingled with other marital assets, however, such that they become virtually indistinguishable from marital assets, the family court will likely NOT consider the inheritance amount to be separate, non-marital property.

For example, if the inheritance is deposited into any joint account along with other joint funds or if it is used to purchase or make improvements to the marital home, it will probably lose its separate property status and will be subject to equal or equitable division upon divorce. Similarly, if one spouse inherits a piece of real estate and marital funds are invested to improve the property, it may be considered marital property.

Inheritance Received Prior to Marriage

The same is true of an inheritance acquired prior to the marriage. It will be considered separate property unless and until it is commingled with joint assets during the marriage (either by adding marital funds to the inheritance account or by using the funds as described above).

If inherited assets are kept separate but appreciate in value during the marriage, the non-inheriting spouse may have a legitimate claim to a share of the increased value (but not to the principal).

Many spouses-to-be with substantial inheritances will choose to execute a prenuptial agreement to make all issues regarding pre-marital, separate property perfectly clear prior to the marriage.

Inheritance Impact on Support

One other way in which an inheritance can impact a divorce is in the support arena. If a spouse has a large enough inheritance that pays regular distributions or dividends, those amounts can be considered income for purposes of determining spousal support and child support.

Future Inheritance

We often hear questions regarding the expectation of inheritances after a divorce. If one spouse expects to receive a substantial inheritance in the not-so-distant future, it can often be difficult for the other spouse to swallow an equal division of marital property. However, speculation as to future inheritance is just that – speculation. The bequeathing party might not pass away for many years. The inheriting spouse might die before the bequeathing party. The will can be changed; the trust can be changed.

The court will not consider the spectre of future income via inheritance when establishing support orders (and dividing property in an equitable distribution state) because of the indefinite nature of the financial situation.

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Discussion

  • fed up

    My husband is an alcoholic. I would like to seek a divorce but am worried that he will be able to keep most of our joint bank accounts because much of the money was received by him as an inheritance. He received the money during our marriage (of 11 years) and it was immediately put into a joint premium savings account. We use this money jointly and always have. I live in Hawaii. Please advise! Thank you!

  • FED UP IN NH

    HI , I LIVE IN NH .I AM SEEKING A DIVORCE . I AM IN A BAD MARRIAGE . MY FATHER PASSED AWAY AND LEFT ME AN INHEIRTANCE . IS MY INHEIRTANCE CONSIDERED JOINT PROPERTY IN NH . IT WAS NEVER PLACED IN A JOINT ACCOUNT

  • fed up suc.trust wif

    Im married to an abusive man im the succesor trustee of the trust and executor of the will of my mother in law. the only asset in the trust is the hose which my husband will inherece once my mother in law dies. she suffered froma stroke 2 years ago i left my job and carrier to take care of here some of the money from my husband and I savings account was used to make all the adaptaions require for her care. so is the house considered a joint property? what are my rights?
    thanks

  • being taken

    My wife just received a large inheritance in the millions now she wants a divorce from me and take half of my mil retirement…..Ive been a good faithful husband. Ive all ways supported her and now this

  • concerned in il.

    If i put a down payment on a home for my husband and i but in his name alone due to credit issues on my behalf, do i have any rights to the property or can i have something drawn up legally to make bouth of ours. please help me

  • Mary Lord

    My ex husband is trying to convince the judge that furniture given to us when we moved into our first house and his family were downsizing and moving out of state is considered “Inheritance” or “Family herlooms.” both parents dies years before our divorce. He even wants all the gifts that were given to the children returned to him as he states they are part of his mother’s estate?

  • Wendy

    was left a large sum of money at age nine. Now 64 and have been married 6 2/3ears. My husband is trying to find out from a l;awyer what is his entitlement. I have never touched the fund. It still sits where my father put it. Is he entitled to anything?

    • If the money is an inheritance and you have never commingled it with your joint assets then that money is yours and your husband has no claim to it.

  • frannces

    I am living with my husband but we haven’t lived together as man and wife for 7 years. I want a divorce and he has agreed but I am due some compensation from a personal injury at work soon, can he claim a share