Divorce Law and Inherited Money

Jodee Redmond
Keep inherited money separate from marital funds.

Divorce law and inherited money can be complicated. This article will explain the basics so that you will understand how an inheritance is treated when a couple wants to divorce.

An Overview of Marital Property

When a couple is divorcing, the assets they accumulated during the marriage will be divided according to the law of the state where the divorce papers were filed. If the couple files in a community property state, such as California, the marital property is divided equally.

In other parts of the United States, marital property is divided equitably. This doesn't necessarily mean that the assets are split up the middle. The couple may be able to reach an agreement with the help of their attorneys to divide their marital property in a way that they feel is fair. One spouse could be awarded a larger percentage of the marital assets than the other if the case is being decided by a judge.

Divorce Law and Inherited Money: Non-Marital Property

If a person receives an inheritance, it is not considered part of the couple's marital property. The law states that the inherited money belongs to the person who received it. As long as the recipient keeps it separate, it is not included when the time comes to divide the couple's assets in a divorce settlement.

A future inheritance that a person is expecting to receive is not included in calculations of marital property. The Court has determined that since a person who is competent has the right to change his or her will at any time, the expectation of receiving an inheritance cannot be considered an asset that a person owns.

Keep Inherited Money Separate

The thing to keep in mind here is that if you want to keep an inheritance from being considered marital property, it must be kept separate from marital property. To do this, you would need to deposit the funds into a bank account in your name only. Adding other money to it that would normally be considered marital property (such as a paycheck) may mean that the entire balance in the account would be considered a marital asset. Divorce law and inherited money also considers that if you use some or all the funds you received as an inheritance to pay down marital debt or expenses, that portion becomes marital property. Depending on the state in question, even if you replaced the money you used to pay the debt or expenses after the fact, the entire amount of funds in the account becomes marital property. In other parts of the United States, the fact that you withdrew a portion of the inherited money to pay for something that would normally be considered marital property means that all the money becomes marital property.

Get Expert Advice

If you are expecting to receive an inheritance and you want to make sure that is not considered marital property, the best course of action would be to consult with an attorney before you deposit the check. You also have the option of opening a new account in your name only and depositing the funds with the intention of leaving them alone until you can get legal advice. That way, you will be informed about your rights, and you can act accordingly.

The bottom line is that you need to keep the funds completely separate from other marital property. Failing to do so may mean that the entire amount you receive is considered a marital asset subject to division in a divorce action.

Divorce Law and Inherited Money