Inheritance Issues in Divorce
A common question in many divorces is: “what is going to happen with the inheritance?”.
Those questions usually fall into three categories:
(1) the inheritance that was received before the marriage;
(2) the inheritance received during the marriage, and
(3) the inheritance that might be received in the future.
Special rules apply to what happens with inherited property or inherited money when people get divorced. As you might expect, there are many variables to be considered.
Inheritance and Divorce | Before the Marriage
The easiest question about inheritance is what happens with money that was inherited before marriage.
The simple answer is that as long as that money stayed in the name of one spouse during the marriage, it is probably not property to be divided in the divorce.
It would most likely be considered “separate property”. As long as the inheritance was not commingled with marital money, that inherited money will remain with the spouse that received it.
[When one spouse does have money they inherited before the marriage, that is a great argument for having a prenuptial agreement, but that is a topic for another day.]
Inheritance and Divorce | During the Marriage
The most common situation, and the one that creates the most arguments during a divorce, involves inherited property that is received during a marriage.
Usually, that property is the sole property of the person who receives it if they keep it separate from the other spouse.
Spouses Father – Example 1
The easiest example is when a wife’s father passes away and leaves her a bank account with $100,000 in it.
As long as that money stays in that bank account during the marriage with only the wife’s name on it and the money is not shared with the husband, that property is most likely going to be the sole property of the wife and will not be subject to division in a divorce.
That’s the easiest example.
Separate or Combined Accounts – Example 2
Problems can arise if that money is moved to another account. If that money is moved into an account with the husband’s name on it, a strong argument can be made that this previously separate inherited property has been converted into joint marital property.
If the property had been kept separate in the wife’s name only there was very little that the husband could do, but once sole property is commingled with marital property it is no longer separate property.
Potential Problems with an Inheritance
Another common problem is when inheritance money is used to purchase a marital home.
The simplest argument is the same as the bank account example. The inherited money which was used to purchase the home now becomes marital property.
There is an argument that can be made that the person who contributed their inherited property may be entitled to the return of that money, but I would not want to rely on that argument.
Some of the different factors that could be considered in that situation is the actual amount of inherited money used to purchase the property.
Or whether the other spouse used any of their money for the purchase, or whether any joint money was used to purchase the home.
Or how long before the divorce was filed was the purchase of the home.
As you can see, the answer to what happens with that money can get complicated, which is all the more reason to have a lawyer represent you.
What if you’re DUE an Inheritance?
The other inheritance “situation” that arises is when one of the spouses might receive an inheritance in the future.
There are many times when a spouse will make an argument that their partner’s family is rich and that the other spouse is going to be receiving a large amount of money in the future, so that should be included in dividing the marital property.
The very simple answer to that “argument” is that it does not matter. A spouse’s parents are not a part of the divorce. The parent’s money is not marital property. Any money that
one spouse or the other might receive in the future is only speculation. An inheritance in the future is not an asset to be divided in a divorce.
Lessons about Divorce and Inheriting Anything
The main lesson here is that as long as the inherited money or inherited property remains in the name of one spouse and is not used by both parties, that money or property will remain in the name of that partner and cannot be touched or will not be touched by the court in any divorce distribution.
Just remember that if issues like this arise in your marriage, or arise before you get married, it is always smart to get legal advice so that you don’t have a problem later on.
