How Divorce Affects Inheritance of Property

How Divorce Affects Inheritance of PropertyMarriage and divorce are legal constructs developed over the course of history when family relationships were fairly uniform. People tended to get married young, raise a family, and then die and leave their estate to their kids. Divorce was unheard of. Marriage and divorce laws today can get very tricky for anyone falling outside this standard path.  

Inheriting from an ex-spouse

Just as marriage impacts the manner in which property is inherited, divorce also determines how a deceased ex-spouse’s estate is distributed. Whether or not divorce will impact an ex-spouse’s status to inherit under his or her ex-spouse’s will varies by state and also depends on whether the ex-spouse died without a will (intestate) or had a will in place.

A majority of states include provisions in their laws that state that if a couple divorces, the former spouse’s right to inherit from his or her former spouse is automatically revoked if the ex-spouse was included into a will and never removed upon divorce or if the ex- spouse died intestate.   However, some states allow for an ex-spouse to challenge a will and request an equitable share of the estate even after divorce. Based on the numerous ways in which divorce can still leave uncertainty in estate planning, it is important to amend a will and other estate planning documents after a divorce.  

Inheritances and the division of property during divorce

The division of property during a divorce depends on classifying assets as either a marital asset or non marital assets with the former being divided equitably between the divorcing couple. When a spouse inherits from an estate, questions often arise as to whether this inheritance will be treated as a marital or nonmarital asset. In cases whereby the spouse inherited prior to the marriage, the solution is since the assets from the inheritance would have been acquired prior to marriage thus classifying it as a non-marital asset.

For inheritances received during a marriage, the rules become more complex in that whether an inheritance remains a nonmarital asset depends on whether the inheriting spouse intends to keep the property as separate from other marital assets. If the inheritance is segregated into a separate account and not mixed with other marital assets or spent expenses or property used communally, the presumption will likely be that it is a non-marital asset. However, if the proceeds from an inheritance are mixed with other marital assets or otherwise treated as marital property, they will be viewed as marital assets and subject to division during a divorce. Each spouse will get half of the marital property at divorce. At death of one partner, a surviving spouse usually gets everything that is not specifically given to someone else in a will or similar estate-planning tool.

If a spouse wishes to be certain that inherited property will not be considered marital property, the most certain way is to avoid commingling the inherited property with other marital assets. For inheritances that involve liquid assets, such as cash or investment accounts, it is important to keep these accounts registered only under the spouse who inherited the asset. For real estate or other property, the property should only be titled under the spouse who inherited the property.

 Beware of the second marriage

In most marriages, one spouse will die and most the property will go to the second spouse.  Then when the second spouse dies everything goes to the kids. That standard inheritance path can be shaken up greatly by divorce. Consider this very common scenario: two parents divorce and the wealthy father remarries and has a new kid with his second wife. Then the father dies and his entire estate goes to the second wife.  When she dies, everything will go to her kids and the first set of kids have zero rights to what is left of their father’s property.

Deathbed nightmare scenarios

Consider the case of Debrah Karlstein. She is a New York City socialite who married and had two kids with a wealthy partner at a law firm.  The couple split up, however, and as part of the divorce settlement she and her two sons were allowed to live in the $2.3 million apartment the couple once shared. Then, the ex-husband moved on and found a new girlfriend. Just as things were getting serious he was stricken with cancer. The new couple got married and on his hospital death bed he called in his lawyers to revise his will to give most everything to his new wife. The man died soon after, and just like that the second wife owned the home the first wife was living in.

Think ahead in a divorce

It is best to address these issues at the time of divorce. A divorcing couple can agree to keep their current children in their wills, though that can usually be revoked later. A stronger measure would be for the divorcing couple to set aside some of their property in a trust for their children to eventually own.  A small number of states do have protections to avoid children being accidentally left out, but you should not count on that without consulting a lawyer first.  

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