Inheritance and Gifts; Keeping What is Yours
It is never easy to lose a loved one. In cases where the passing of a family member involves an inheritance / gifts, the financial benefit can help ease the transition for the grieving.
Divorce and separation proceedings can add more pain with the loss of a family member. With inheritance or estate cases, it’s important to know how to protect yourself from the legal turmoil from a financial separation.
Key Background Information
Before we talk about how to protect your inheritance from an ex-spouse, it’s important to take note of some key concepts regarding your assets. In general, there are two types of assets to be handled in any divorce case: separate property and marital property.
Separate property, in most cases, includes the following:
- Property owned or obtained by either spouse either before marriage or after the legally recorded date of separation
- Inheritances received by a single spouse
- Gifts to a single spouse from a third party
- Settlements for pain or suffering from personal injury lawsuits
- Any property otherwise identified in a pre- or post-nuptial agreement
Everything else is typically considered marital property, and is subject to distribution under the laws of the state in which the divorce takes place.
Inheritances
Inheritances are considered separate property. However, you may be wondering how they can be threatened in divorce proceedings?
When the inheritance / gift is received and deposited into a bank account solely owned by the recipient
- that money is typically protected during divorce proceedings.
Although, if the funds are deposited into a jointly-owned bank account, or used toward a joint purchase
- the funds could be considered marital property.
- As a result, the inheritance will likely be subject to division just like everything else.
Gifts
A gift from a third party is usually considered separate property and wouldn’t be subject to distribution during a divorce. That said, the same concept about co-mingling the funds applies.
For example: If the gift was a loan to make a down payment on a jointly owned house…that money could be considered as marital property. It could be up for the divorce lawyers on each side to make a case for whether or how it should be divided.
The easiest way to protect your inheritances and gifts is to keep them in a separate bank account. One that solely belongs to you.
You can use these funds at your discretion. But know that making joint purchases or co-mingling the money with your other assets may lead to your inheritance or gift being viewed as marital property, and thus subject to division.
