The end of your marriage can have a significant impact on your finances. If your loved one left you a significant inheritance when they passed away, your divorce can lead you to question what will happen to those funds. Will you keep your inheritance after divorce, or will your spouse leave the marriage with part of that inheritance?
Generally, your inheritance is not jointly-owned.
While the courts view most property or debt acquired during your marriage as owned equally by you and your spouse, some types of property are exempt from this.
Inheritances left to only one person—like gifts given to only one spouse, assets owned by one spouse prior to marriage or personal injury compensation—generally fall under the category of separate property.
Couples may also protect their inheritance through a prenuptial agreement that formally designates that property as separate.
However, things can change if your funds become commingled.
Even if some assets would generally be separate property in a divorce, money, real estate and other inherited property can become marital property through a process known as commingling. Commingling can occur in a variety of different ways, including:
- Depositing inherited money in a joint account
- Placing inherited money in an account that also contained marital funds, such as an account into which you also deposited a paycheck
- Using marital funds to maintain an inherited piece of real estate or an inherited business
- One spouse making significant contributions to an inherited business
In each of these cases, the line between a couple’s joint assets and their separate property becomes blurred. This can make it difficult—or even impossible—to determine which category those assets fall under, and couples may need the assistance of a forensic accountant to divide that separate property again.
Divorcing people concerned about the fate of their inheritance should carefully craft their legal strategy to protect those funds and prioritize their financial health.
