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Between the people and the property, there are a lot of moving parts in a divorce. And while we often focus, for good reason, on the easy-to-spot issues like custody, child and spousal support, and who gets the house, we often forget to keep our eye on smaller financial issues like retirement benefits, investment funds, or inheritance.
Whether you're the beneficiary of an inheritance before the divorce or you're concerned about your children's inheritance after the divorce, here's how courts generally handle inheritance issues in a divorce.
Your Own Inheritance
When deciding whether property, including financial assets, is going to belong to one spouse or be split between them in a divorce, the law generally splits property into two classifications: marital property, which is subject to division between the two parties; and separate property, which cannot be divided. While state laws on property division can vary, generally speaking inheritances are considered separate property belonging to the party who received the inheritance, and therefore not subject to division between the parties in a divorce.
While this is normally the case regardless of whether the inheritance was received before or after the marriage, what you do with the inheritance funds once you've received them can affect how those funds are handled in a divorce. Again, not every state is the same, but if inheritance funds have been comingled (i.e., deposited into a shared bank account or used to make improvements to the primary residence), the inheritance then loses its immunity and becomes marital property that can be divided in the divorce.
Your Children's Inheritance
How courts treat inheritance meant for a child or children involved in a divorce generally depends on whose children, whose divorce, and what state the divorce occurs in. In most cases, each spouse can bequeath their own separate property as well as their share of the marital property how they see fit. So if you are trying to guarantee an inheritance for children born outside of the marriage, this can generally be done through a will or a trust.
And if you're worried that your adult child's divorce will put his or her inheritance at risk, you should be sure to bequeath the property in only their name, and advise them to avoid comingling the funds with their spouse. Again, placing the inheritance in a trust can protect it in case of a divorce.
If you're worried a soon-to-be ex could take half of your inheritance, or you want to protect a child's inheritance from your divorce or his or her own, talk to an experienced divorce attorney today.