How to Protect a Future Inheritance during Divorce
“Will I have to share my inheritance with my ex-spouse?”
It’s a simple (and understandable) question with a not-so-simple answer. If you're in the midst of a separation or contemplating one, it's crucial to understand how to safeguard your future inheritance from potential division.
Protecting your inheritance in divorce
Over the course of our lives, we often accumulate or anticipate acquiring inherited funds or assets that hold a great deal of personal and financial significance. Whether it's a cherished family heirloom, a valuable piece of property, or substantial inherited money, these assets represent more than just their dollar value – they are a part of our legacy and future security.
In the event of a divorce, the thought of sharing or dividing these deeply personal assets can be unsettling. You may find yourself wondering how to protect inherited assets from being seen as marital funds or property in your divorce proceedings.
If you're in this situation, rest assured that there are legal strategies available to help safeguard what you consider solely yours.
Have you received the inheritance yet?
The timeline of receiving an inheritance can significantly impact how it is treated in the event of a divorce. Let’s look at some different scenarios.
Inheritance received after divorce
Generally, if you acquire your inheritance after the divorce has been finalized, it's considered separate property and not subject to division. It's yours alone unless your divorce decree or settlement contains specific provisions to the contrary.
Inheritance received during divorce proceedings
This can be tricky. While inheritances are typically viewed as separate property, if the divorce proceedings are ongoing when you receive it, some jurisdictions might consider it marital property subject to division. This is especially true if the funds get commingled with joint assets.
Inheritance received while married
If you received an inheritance during the marriage, it's typically seen as separate property. However, it can become marital property if it has been commingled with joint assets or used for the benefit of both spouses, like making a down payment for a jointly owned home.
Inheritance received before marriage
Inheritances received before marriage are generally safe from property division in a divorce, as they fall under the category of separate property. But again, the key is to avoid commingling these funds with marital assets.
Get help managing your marital estate with a divorce financial planner.
Tips on how to preserve ownership without having to share
- Create a prenup or postnuptial agreement. These legal documents can be invaluable tools in protecting your future inheritances. They allow you to specify what happens to your assets in the event of a divorce. You can outline your wishes for future inheritances, stating explicitly that they remain separate property and are not subject to division upon divorce.
- Keep your inheritance separate. One of the easiest ways to protect an inheritance is to keep it separate from marital assets. If you already have the inheritance, deposit it in a separate bank account under your name only. Avoid using these funds for joint purposes or putting them in your spouse's name, as this could be seen as “commingling” and may transform the inheritance into marital property.
- Document information about your inheritance. Proper documentation can serve as strong evidence of your inheritance's intended status as separate property. For instance, if your inheritance was given to you as a gift, have the giver document it as such. Keep records of any correspondence that indicates the inheritance was meant for you alone.
Hello Divorce helps with postnups and offers many other divorce support resources as well, including legal advice at a flat rate from an attorney. Our goal is to make divorce affordable and accessible to everyone. If you’d like to learn more about what we offer, visit our plans page or services page, or schedule a free 15-minute phone call to speak with one of our account coordinators about your divorce case or other legal situation.
Suggested: What Is Community Property?
