In divorce, you anticipate that you and your spouse will have to split your marital assets equitably. However, you may wonder if equitable distribution will also apply to your inheritance. The answer to that question largely hinges on how you used your inheritance, and whether you comingled it with marital property.
State laws generally dictate that inheritances belong solely to the individuals to whom they were bequeathed. However, an inheritance can quickly take marital property status and subject to division when an heir uses it “improperly.” According to SmartAsset, “improper use” generally consists of commingling assets.
What it means to comingle assets
Comingled funds or assets refer to funds or assets you and your spouse own jointly. Comingled property is easily available to both of you, you use it to pay for marital expenses and/or both you and your spouse contribute to it. SmartAsset provides several examples of what this might look like.
In terms of a cash inheritance, you risk destroying its separate status when you deposit it into a checking account to which both you and your spouse have access. If your spouse can write checks on the account and make deposits, the inherited funds become comingled and, therefore, subject to division in divorce.
If you inherit physical property, such as a house, preventing the comingling of assets becomes more difficult. For instance, if you and your family live in the house, the courts will consider it marital property. If you and your spouse use a home as a vacation house, the courts will consider it marital property. If you use joint funds to maintain inherited property — even if your spouse never uses the inherited property — it takes on marital property status.
Preventing the comingling of funds
When determining the status of inherited property, the divorce judge will consider intent. You can prove that you intended to keep inherited funds separate by putting them into a separate account and providing documents, such as bank account statements, showing how you spent the money. If the property in question is a home, and if your spouse personally performed needed repairs on it, you can prevent the home from becoming marital property by providing proof of your objections. If you accidentally comingled your inheritance despite your best efforts, you may be able to undo the comingling by showing you intended to keep the property separate and that comingling was an error.
Comingling is a common issue with inheritances. If you inherited assets during your marriage, the best way to protect them is to consult with a lawyer throughout the divorce process.