What happens to inherited money in a divorce?

On Behalf of | Sep 1, 2020 | Property Division |

There are several difficult elements of a divorce, but dividing property can be an especially contentious matter. People can be fearful of being unable to support themselves after the split and angry about having to divide assets to which they feel entitled.

To make matters more complicated, people do not always understand what the law says about property division. For instance, if you have or expect to receive an inheritance, you should understand what will happen to it in a divorce.

Separate property versus marital property

There are two types of property in a divorce: marital and nonmarital (or separate). Most property will be marital, which is eligible for division. Separate property, however, generally stays with the person to whom the property belongs.

Nonmarital property includes anything an individual owned before marriage, as well as gifts he or she received during the marriage. An inheritance left to just one party will typically fall under the separate property category. Thus, the individual will often keep the entirety of the inheritance in a divorce.

Further, any property purchased solely with inherited money can be nonmarital property.

Special circumstances and exceptions

Keep in mind that there are situations in which an inheritance (and property purchased with inherited money) can be eligible for division.

For instance, if you mix inherited money with marital accounts or use it to pay part of your mortgage, these actions would be commingling assets, meaning the inherited money loses is status as nonmarital.

Another situation that could arise is if a person inherits income-earning property. While the property itself may be nonmarital, any income it generates during the marriage can be marital, as could appreciation of the property if the non-owning party actively contributed to the increase in value.

Preserving an inheritance in a divorce

If you received an inheritance while you were married or expect to receive one, you can take several steps to protect it from division in a divorce. Options can include creating a prenuptial or postnuptial agreement, keeping it separate during the marriage and negotiating retention of the property during property division discussions.