As an estate planning attorney, I often hear clients express concerns about protecting their inheritance from divorce. It's a valid concern, as divorce can be a messy and emotional process that can have a significant impact on your financial future. In this article, we'll discuss the legal and practical aspects of protecting your inheritance from divorce and provide some tips on how to keep it separate.
First, let's define what we mean by inheritance. Inheritance can take many forms, including cash, property, and valuable possessions. It's typically received by an individual as a result of the death of a family member or loved one. Inheritance can be considered separate property not subject to division in the event of a divorce. However, if inheritance is commingled with marital assets, it may become part of the pool of assets to be divided.
Commingling is the act of mixing separate property with marital property. For example, if you inherit a sum of money and deposit it into a joint bank account with your spouse, that money may be considered marital property. The same is true if you use your inheritance to purchase a home or other property with your spouse.
Once inheritance is commingled with marital assets, it can be difficult to separate it out. In some cases, it may be impossible to prove what portion of the commingled assets is separate property. This is why it's important to take steps to keep your inheritance separate.
Here are some practical tips for keeping your inheritance separate:
One of the easiest ways to keep your inheritance separate is to deposit it into a separate bank account in your name only. This will help ensure that thefunds are not commingled with marital assets and can be easily traced back to their source.
If you use your inheritance to purchase property or other valuable assets, make sure the title is in your name only. This will help establish that the property is separate property and not subject to division in the event of a divorce.
It's important to keep good records of any inheritance you receive and how it's used. This can include bank statements, receipts, and any other documentation that shows the source and use of the funds. This will help in establishing the separate nature of the inheritance in the event of a divorce.
Avoid using inheritance to pay for joint expenses or debts. Also, avoid using marital funds to maintain or improve inherited property. By keeping inheritance separate and not mixing it with marital assets, you can help ensure that it remains separate property.
It's best to avoid joint ownership of any assets purchased with inheritance. This can include real estate, vehicles, and other valuable items. Joint ownership can make it difficult to establish the separate nature of the inheritance and may result in the asset being considered marital property.
If you're getting married and have concerns about protecting your inheritance, consider a prenuptialagreement. A prenup can establish that your inheritance is separate property and not subject to division in the event of a divorce. It can also outline other financial arrangements between you and your spouse.
In addition to practical tips, there are legal options for protecting your inheritance from divorce. One option is to create a trust. By placing your inheritance in a trust, you can control how and when the funds are distributed. You can also establish that the trust assets are separate property not subject to division in the event of a divorce.
Another legal option is to create a postnuptial agreement. This is similar to a prenup but is created after marriage. Like a prenup, a postnup can establish that your inheritance is separate property and not subject to division in the event of a divorce.
Protecting your inheritance from divorce requires a combination of practical steps and legal planning. By keeping your inheritance separate and avoiding commingling with marital assets, you can help ensure that it remains separate property.
Legal options like trusts and postnuptial agreements can provide added protection. If you have concerns about protecting your inheritance, it's important to speak with an experienced estate planning attorney who can help you create a plan that meets your needs.