An inheritance can be a strong source of contention during a divorce case. On one side, the person who got the inheritance from their parents may believe that the money should stay in the family and that they should keep the entire amount even after the divorce. On the other side, their ex may view the inheritance as a major financial asset that they were also planning to benefit from, so they may believe that they deserve up to half of that financial account.
How this is handled often depends on the way that the couple addressed, stored or used the inheritance during their marriage. The key is to determine if it’s a separate asset or not.
Separate and marital assets
To start with, the inheritance is likely a separate asset. If someone’s parents give them money in their estate plan, it’s a direct gift, so they own it independently. Even if they’re married, the gift was to them.
This can change, though, through commingling or mixing the inheritance with other funds. They may put the money from the inheritance in a bank account, an investment portfolio or a retirement account. If this account is shared with their spouse, then the money has been commingled, and that can turn it into a marital asset that needs to be divided.
The same is true if they use the money to buy marital assets. A couple who uses an inheritance to pay off their home, for example, still owns the home jointly. It’s a marital asset that has to go through property division.
Conflicts in these areas are common, and there can be a significant amount of money on the line. It’s important for those involved to understand exactly what legal options they have.
