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How Is Inheritance Handled in Divorce?

How Is Inheritance Handled in Divorce

A divorcing spouse will often feel that it is just not right for the other spouse to get a piece of his or her family inheritance.  Luckily, the law will generally protect inheritance that belongs to one spouse, but only if it is kept separate from the marital property.

General divorce and property division

Most divorces today without fault mean that the couple has simply decided to part ways.  As such, the law typically just tries to ensure that each spouse is given a fair share of the assets of the marriage.  The specifics vary from state to state, but there are two main systems.  A number of states use a community property system, where the assets of a couple are considered either jointly or separately owned and in divorce, the jointly-owned community property is divided evenly.  Inheritance or assets from before the marriage are generally separate, while everything earned during the marriage is generally community property.  So jointly owned assets like a house the couple had purchased together is divided while separate property like a necklace inherited by one spouse stays with that spouse only.

Most states use an equitable division model, though.  Property in equitable division states is generally owned by whoever has their name on it.  A car entitled to a wife is owned by the wife, for example.  In a divorce, however, the court will disregard that and instead total up all the marital assets and divide them up fairly after considering a list of relevant factors, like the length of the marriage and relative earning potential of each spouse.  Again, the court is splitting marital property, but separate property, which can include inheritances, will not be split. Separate property can be a factor which is considered, though.  A judge may award a lesser split of the marital assets to a spouse who is independently wealthier.

Do not commingle anything you want to keep

The bottom line is, whether you live in a community property or equitable distribution state, you have to keep separate anything that you want to protect during a divorce.  This is sometimes easy but other times it may not be so easy.  Consider an example where your grandmother dies and leaves you an expensive necklace that you want to go to your daughter and not your husband upon your death.  It is fairly simple to keep that necklace separate from your husband’s property.  It may be wise to document the situation in a prenuptial agreement.  Simply make clear that the necklace is not to be considered as a property of the marriage.

Keeping inherited property separate is not always so easy.  The most common problem is inheriting cash.  Once you move that money over into a joint account, it is likely going to be subject to division during your divorce.  Property that requires maintenance is also a problem.  Think about a situation where you inherit an antique car, for example, and then you get married and use your income during marriage to restore the vehicle to its former glory.  The value of the vehicle would likely be subject to division at divorce, and you could have to sell the car to pay what you owe your spouse.

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