When Would an Inheritance Be Considered A Marital Property

Inheritance can be a sensitive topic in marriage, especially during a divorce. Many people wonder, “When does an inheritance become marital property?” Grasping the difference between marital and separate property is essential for protecting your assets.

What is considered marital property?

A marital property encompasses all assets obtained by either spouse throughout the marriage. This covers income earned from jobs, bonuses, and even dividends from investments. Real estate bought during the marriage, whether it is a family home or rental property, also counts as marital property. Vehicles bought during the marriage, regardless of whose name is on the title, are included in this category as well.

Investments made with joint funds, such as stocks, bonds, and retirement accounts, are considered marital property. Debts incurred during the marriage, like credit card balances and mortgages, are also divided upon divorce. Washington is a community property state, which means these assets and liabilities are typically seen as belonging equally to both spouses. The aim is to divide them fairly, which might not always be a 50/50 split but rather an equitable distribution based on each spouse’s circumstances.

However, some assets can remain separate property if they are managed correctly. For example, gifts or inheritances received by one spouse and kept separate from marital funds remain that spouse’s separate property. Assets owned before the marriage remain separate unless they are mixed with marital assets. Maintaining clear records and documentation is crucial to demonstrate that these assets are indeed separate.

What about inheritance?

Inheritance often falls into the category of separate property. Typically, separate property consists of assets owned by a spouse before marriage and those received through gift, bequest, devise, descent, or inheritance during the marriage. Therefore, in most situations, an inheritance stays with the inheritor and isn’t divided during a divorce.

This rule generally applies to the inheritance itself and any assets bought using the inherited funds. For instance, if someone inherits money and uses it to buy a car or invest in a property, those purchases are usually classified as separate property. The law protects the inheritor’s right to retain ownership of these assets, provided they are not commingled with marital funds or used for joint expenses.

However, it’s crucial to keep inheritance funds separate from marital assets. Combining inherited money with joint accounts or using it for shared expenses can cause the inheritance to be classified as marital property. To keep inherited assets as separate property, it’s important to manage and document their use carefully.

When would an inheritance be considered marital property?

Inheritance may turn into marital property in specific situations, which could result in it being divided during a divorce. Here are scenarios where an inheritance might lose its separate property status:

1. Commingling Funds

If inherited money is placed into a joint account and used for shared expenses, it might be classified as marital property. This blending of funds makes it difficult to trace the inheritance, leading to its classification as community property. For example, if you inherit a sum of money and deposit it into a joint bank account with your spouse, then use that account to pay for household expenses, the inheritance may no longer be considered separate property.

2. Using Inherited Money for Joint Expenses

Paying for community bills, like a mortgage or car payments, with inherited funds can also change its status. When inheritance is used for joint expenses, it becomes part of the marital assets. For instance, if you use inherited money to pay off the mortgage on a jointly owned home, the funds may be deemed to have benefited the marital estate, potentially changing their classification to marital property.

3. Changing the Title of Inherited Assets

Adding a spouse’s name to the deed of an inherited property can change its classification. This action signifies a gift to the marital estate, making the property subject to division. If you inherit a house and later add your spouse’s name to the title, this could be interpreted as an intention to share the property, converting it into marital property.

4. Creating a Joint LLC

Transferring inherited assets into a jointly-owned limited liability company (LLC) can convert them into marital property. For instance, putting an inherited property into an LLC jointly owned by both spouses changes its status from separate to community property. Even if the intention was to protect the asset, it could lead to its inclusion in the marital estate during a divorce.

Being aware of these situations aids in making wise choices about handling inherited assets. Maintaining thorough records and seeking advice from legal experts can offer clarity and safeguard your interests in a divorce.

What can you do to protect it?

Protecting inheritance from becoming community property involves careful planning and clear boundaries between separate and marital assets. Here are some steps you can take:

• Keep Inherited Funds Separate: Maintain inherited money in a separate account. Refrain from combining these funds with joint accounts or using them for shared expenses. Keeping accurate records of all transactions involving the inheritance helps demonstrate that it remains a separate property.
• Avoid Using Inherited Money for Marital Expenses: Paying for joint bills or expenses with inherited money can combine the funds. Use the inheritance strictly for personal expenses or investments that remain in your name.
• Maintain Separate Titles for Inherited Assets: Avoid adding your spouse’s name to the title of inherited properties or assets to keep them classified as separate property.
• Consult a Legal Professional: Consulting a family law attorney can offer essential guidance and support. They can help you establish strategies to protect your inheritance and navigate the complexities of property division during a divorce.
• Consider a Prenuptial or Postnuptial Agreement: Such agreements can define the status of inherited assets and safeguard them during a divorce. Specifying what qualifies as separate property can help avoid conflicts in the future.

Learn to protect your inheritance from becoming community property

To protect your inheritance during a divorce, it’s important to understand when it can become marital property. Generally, inheritance is treated as separate property and not divided in a divorce. However, if you mix inherited funds with joint accounts, use them for shared expenses, change titles to include your spouse’s name, or transfer them into joint entities like LLCs, they can become marital assets. To keep your inheritance safe, keep inherited money in separate accounts, avoid using it for joint expenses, keep titles separate, and consult legal professionals. Taking these steps helps ensure your inheritance stays protected and separate.