Inheritance and Your Divorce

An inheritance may have been left to you alone or to you and your spouse jointly. And now you are going through a Bucks County divorce wondering if it is – or what part is – legally yours. To whom it was left and what was done with it will determine whether or not it will be subject to division in your divorce settlement.

 What Causes an Inheritance to Become a Marital Asset?

There are essentially three ways any asset that starts out as yours alone becomes marital property: commingling, transmutation, and “sweat equity.” 

Commingling simply means that you have shared the benefits of the inheritance. For instance, if you inherit money and you put it in a joint account, it is now considered a shared asset. If you inherit a house and put your spouse on the deed, it is a shared asset. That’s fairly obvious. Less obvious is if you set up a separate inheritance account in your name but subsequently deposit joint money into the account – for instance, your spouse’s paycheck or the profits from the sale of a joint asset. The inheritance account then becomes a marital asset, because you have ceased to treat it separately. 

Transmutation is like slow commingling. For instance, let’s say you inherited a car and registered it in your own name, but used joint funds for yearly inspections. Over time, the use of shared funds for upkeep would demonstrate that the car was a shared asset. This could happen in the case of an inherited home as well.  

“Sweat equity” refers to non-monetary contributions your spouse makes to your inheritance. This generally only happens with assets, such as an inherited house that is in your name alone but your spouse makes repairs on in order to make it ready for sale or rental. Your spouse’s hard work, know-how, and tools could be considered equity in the property. Whether the property becomes fully or partially a marital asset will depend on the judge’s judgment on how much sweat equity was invested in the house in proportion to the property’s value.

How Can I Keep My Inheritance Separate?

Making the argument that your inheritance is separate property and not intended for marital use requires a high burden of proof, and thus some planning ahead. Whether you are expecting to divorce or not, if you have received an inheritance or expect to receive one, follow these steps to protect your assets from property division:

• For monetary inheritance, keep funds in a separate account in your name only; use it only for your own expenses; do not add funds to the inheritance account that have been gained through any joint means.
• For inherited property or objects, make sure the registration or deed is in your name only; use only your own funds and effort for maintenance and other expenses; if your spouse insists on helping to maintain the asset (thus risking sweat equity) keep the involvement limited and maintain evidence that you did not want the help – such as hiring an electrician, even if your spouse has voluntarily attempted to fix an electrical problem.
• Maintain documents that prove the inheritance was intended solely for you.
• Consider a prenuptial or post-nuptial agreement that includes protection of inheritance from designation as a marital asset. This should be carefully crafted by a divorce attorney in order to shield you from the argument that your subsequent use of the inheritance for family expenses voids the document.

If you have any questions about divorce and your inheritance, reach out to us here at the Law Office and Mediation Services of Elissa C. Goldberg, (215) 345-5259. We are focused on providing legal assistance to help families through divorce, child support, and custody issues.