Marital property, the shared assets and possessions accumulated during a marriage, often becomes a central point of contention during divorce proceedings. The distribution of assets can be a complicated and emotionally charged procedure, as both partners seek to secure their equitable portion. However, what happens when one party brings an inheritance into the marriage? Are inheritances considered marital property? Can they eventually become part of the communal assets? In this article, we will delve into the intricacies of marital property, examine the treatment of inheritances, and explore when an inheritance might be considered marital property.
What is Marital Property?
Before we dive into the specifics of inheritances, let’s clarify what marital property entails. In a legal context, marital property refers to assets, whether tangible or financial, that are acquired during a marriage. It includes everything from real estate and vehicles to income earned during the marriage. The treatment of marital property varies from state to state in the United States, as different jurisdictions adhere to either community property or equitable distribution principles.
In states that follow community property laws, marital assets are typically divided equally between spouses during divorce proceedings. This means that each spouse usually receives an equal 50% share of the assets acquired throughout the marriage. These states encompass Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. Conversely, equitable distribution states aim to distribute marital property fairly, which may not necessarily entail an equal 50/50 split.
What is Considered Part of Marital Property?
To better understand the classification of inheritances in marital property discussions, it’s crucial to grasp what is typically considered part of marital property:
- Assets Acquired During the Marriage – Generally, any assets acquired during the marriage are deemed marital property, regardless of which spouse’s name is on the title. This includes income earned by either spouse and items purchased using shared funds.
- Separate Property – Assets possessed by either spouse before entering the marriage are typically categorized as individual or separate property. These can encompass personal belongings, pre-marital real estate, and financial assets held individually.
With these basic principles in mind, let’s delve into the central question: are inheritances considered marital property?
Are Inheritances Considered Marital Property?
Inheritances, whether received before or during a marriage, are typically not treated as marital property. Instead, they are regarded as separate property belonging solely to the person who received the inheritance. This categorization is crucial because, in most cases, separate property is not subject to division in the event of a divorce.
The reasoning behind this classification is relatively straightforward: an inheritance is considered a personal windfall, often coming from family members or loved ones, and is meant for the exclusive benefit of the recipient. Thus, it is presumed that an inheritance should not be subject to division between spouses upon divorce.
However, the situation becomes more nuanced when inheritances are not kept strictly separate during the marriage.
When Would Inheritances Be Considered Marital Property?
While inheritances are typically considered separate property, there are specific scenarios in which they can potentially be categorized as marital property. These scenarios revolve around the concept of commingling and the legal doctrine of transmutation.
Commingling Property in a Marriage
Commingling occurs when inherited funds or assets are mixed with marital property or otherwise used for common marital expenses. For example, if an inheritance is placed into a shared bank account that both partners utilize for joint expenses, the inheritance might forfeit its designation as separate property. The process of commingling effectively blurs the line between separate and marital property, leading to a potential reclassification as marital property.
A similar situation arises if inherited funds are used to improve jointly owned real estate, as these funds may also lose their separate status. In essence, commingling can inadvertently transform separate property into marital property.
Transmutation of Inherited Property
Transmutation, on the other hand, occurs when separate property changes its character and becomes marital property or vice versa. The rules surrounding transmutation can vary significantly among states, making it essential to consult a legal expert in your jurisdiction.
For example, suppose you use inherited funds to purchase a jointly owned asset, such as a family home, with your spouse. In that case, the inheritance could be considered transmuted into marital property. The specifics of transmutation can be complex, but generally, if the court struggles to distinguish between separate and marital funds in an account, they are more likely to treat the assets as marital property.
Tips To Keeping Inheritance Separate
To safeguard an inheritance as separate property, there are several precautions that can be taken. Below are some tips that allows you to keep inheritance from becoming marital property:
- Maintain Separate Accounts – Keep inherited funds in a separate bank account under your name alone, distinct from any joint or marital accounts.
- Document Your Intent – Maintain clear records and documentation that demonstrate your intent to keep the inheritance separate. This could include account statements, communications, or legal agreements.
- Avoid Commingling – Be cautious not to commingle the inheritance with shared marital assets. Do not use inherited funds for common expenses or jointly owned property unless you are comfortable with the possibility of the inheritance being reclassified as marital property.
- Consider Legal Agreements – Prenuptial or postnuptial agreements can be effective tools for specifying the treatment of inherited assets. These agreements can outline the ownership of pre-marital assets and future inheritances.
Inheritances Can Be Kept Separate
In conclusion, while inheritances are generally considered separate property, they can potentially become marital property if they are commingled with shared assets or if transmutation occurs. The key to preserving the separate status of an inheritance is meticulous record-keeping and careful financial management. If you anticipate receiving an inheritance during your marriage and wish to maintain it as separate property, seeking legal advice from a knowledgeable family law attorney is essential. Each state has its laws and practices regarding the treatment of inheritances in marriage, making professional guidance invaluable to protect your assets in the event of a divorce.