I’ve Inherited Money during Our Marriage. Do I Have to Split That If I Divorce?

Generally, no. But since this is the law we’re talking about, it’s not that simple.

Unless the parties can come to an agreement, a judge will divide marital property in a fair and “equitable” way during the divorce proceedings. The issue then becomes whether this inheritance, or part of it, is marital property. Money or property inherited by one spouse isn’t normally considered marital property, so it isn’t divided at divorce, depending on how it was handled during the marriage.

Everything divorcing spouses own must be classified as either marital or separate property. Marital property includes assets (and debts) that were acquired during the marriage by either spouse or by both of them together, with exceptions.

Separate property includes assets that either spouse acquired before the marriage and during the marriage when assets are:

• Inherited by just one spouse
• Received by one spouse as a gift from a third party

Separate property can become marital property

An asset may begin as separate property but change (“transmute”) into marital property:

• Adding a spouse to the title: If a spouse inherits real property and later adds the other spouse’s name to the title, it becomes marital property.
• Contributing marital assets: If the title to an asset stays in one spouse’s name and it increases in value, that increase might be marital property. If a spouse helps make mortgage payments or helps pay for remodeling costs for a house that the other spouse inherited and is in that spouse’s name only, any increase in value in the house would probably be considered a marital asset.
• Mixing (or “commingling”) assets: If an inherited sum of money is deposited into a joint account, it may be impossible to determine, if deposits and withdrawals are constantly made, what portion remains separate property.
• Using separate funds to buy marital assets: If a spouse uses an inherited sum of money to buy a house that is in both spouse’s names, this separate asset becomes a marital asset.

Keeping separate property separate and proving it

As long as separate property is carefully kept separate, it and any increased value of it belongs only to the spouse who originally owned it. A prenuptial agreement created before the marriage can also spell out which property is separate.

A spouse claiming to own inherited, separate property at divorce will have to prove it.

• That’s easier when the property was never mixed with marital property and meticulous records were kept to establish that.
• If your inheritance was mixed with joint funds, proving it is separate property is not impossible, but it can be very difficult.

If you have any questions about property division during divorce, contact our office for a free consultation.