The best time to think about protecting your inheritance is when you receive it, not when you file for divorce. By the time a divorce occurs, the die will already be cast, so the sooner you understand what you need to do to protect it, the better.
Will my inheritance be split?
Anything you receive through gift or inheritance is your separate property, even if you receive it during the course of your marriage. It is not considered a marital asset. However, what you do with it during the course of your marriage could potentially turn it into a marital asset, and marital assets are subject to division. So how do you prevent that from happening?
Traceability is the key
If you commingle your gift or inheritance with marital assets, you will need to be able to trace it back to the gift or inheritance in order for it to retain its separate nature. As long as you can properly trace the gift or inheritance, it will remain your separate property and will not be divided in the divorce. But you will need to keep very good records. If you’ve never commingled your gift/inheritance with marital assets, it should be relatively easy to prove. You will simply need to show proof of the gift or inheritance. This is often done with tax or probate documents. But once you commingle that gift with marital assets, it can become much more difficult, and you will likely need to retain an expert to trace the funds.
How long were you married? Be prepared to present statements from every year of the marriage, showing the original gift’s value, withdrawals, and growth or losses. Proving the separate nature of a financial account becomes increasingly more difficult with each deposit and withdrawal. If you deposited additional funds into this account during your marriage, you would need to be able to prove where that money came from. If, for example, it was a deposit made from a bank account containing funds earned during the marriage, you have just inserted a marital asset into your separate property, and any interest gained from that point forward may be considered to be a marital asset.
Real Estate Inheritance
What happens to real estate that you inherited? Will you owe your partner equity out of the home, and could you even be forced to sell it to buy out their interest in it? Again, this would depend on if the separate nature of the asset was destroyed.
As with a monetary inheritance, record-keeping and traceability will be the key to proving if your property inheritance should be considered your separate property. How did you pay the taxes and insurance bills every year? If you used marital assets to pay those bills, the court may consider a portion of the value to be marital and therefore subject to division.
Home Repairs May Be Subject to Division
Did you do any repairs or home improvements to the property? If so, how did you pay for it? If you used marital assets for those repairs, the increase in value attributed to those repairs or improvements will likely be considered marital and subject to division. You might be entitled to the original value of the home at the time of ownership, plus any increase in value up to the time that marital assets came into play, but you may need an expert witness to help prove what those values may have been. Market prices are one thing, but the only true value of a property is what a person is willing to pay for it. If you had the home appraised when you got it, a court may consider that as evidence of the original value, but proving what it was worth at the point where you inserted marital funds into the mix may be more difficult. An expert witness, such as a certified real estate appraiser, may be able to testify as to what the home was likely worth at that time.
Free Consultations are available
Nobody wants to go into a marriage thinking about divorce, but it is an unfortunate reality for about half of American couples. It’s prudent to want to protect yourself and your assets in the event of a divorce, and knowledge is power. Consulting an attorney at the time of the inheritance can save you a lot of time and trouble later if you know how to keep your property separate and the type of records you’ll need to maintain. And if you already have a large inheritance before you marry, a family law attorney can not only advise you on how to maintain separate ownership of it, but they could also draw up a prenuptial agreement to cover this and any other assets about which you may have concerns.
The experienced attorneys at Kirkland & Sommers are here to answer your questions about inheritance or any other family law matter. Call us today to schedule an appointment at our Centerville or West Chester office, or simply click the link below to get started!