Guarding Your Legacy: What Happens to Your Inheritance During a Divorce?
Inheriting assets from a loved one can be a significant financial event, providing stability and opportunities for growth. However, when an inheritance coincides with a divorce, the situation can become complicated. The San Jose community property lawyers at Foster Hsu, LLP understand how inheritance is treated in divorce proceedings is crucial to protecting your assets and navigating the legal landscape effectively.
Inheritance as Separate Property
Generally, inheritance received by one spouse is considered separate property, distinct from community property, which is subject to division during a divorce. This principle is based on the notion that inheritances are personal gifts to the individual and not to the marital entity or community. Therefore, in most cases, an inheritance will remain with the inheriting spouse post-divorce.
However, the treatment of inherited assets can vary depending on how they are managed during the marriage. If the inheritance is kept separate and not commingled with marital assets, it is more likely to be considered separate property. This means that it should be kept in an individual account and not used for joint expenses or investments.
Commingling of Inheritance
One of the primary challenges in protecting an inheritance during a divorce is the commingling of assets. Commingling occurs when the inherited assets are mixed with marital property, such as depositing inherited funds into a joint bank account, using them to purchase a family home, or investing in joint accounts. When this happens, the inheritance may become subject to division during the divorce is a complete tracing of the funds is not prepared.
For instance, if an inheritance is used for community property expenses, these actions can be seen as an intention to gift the funds to the community property. Courts may then consider portions of the inheritance as part of the marital estate, making those funds eligible for equitable distribution between both spouses.
Protecting Your Inheritance
To ensure that your inheritance remains separate property, consider taking the following steps:
- Maintain Separate Accounts: Keep inherited funds in a separate account under your name only. Avoid depositing these funds into joint accounts or using them for marital expenses.
- Document Inheritance: Keep detailed records of the inheritance, including documentation that proves the source of the funds and any transactions involving the inheritance. This can help establish the asset’s separate property characterization in court.
- Consider a Prenuptial or Postnuptial Agreement: These agreements can explicitly state that any inheritance received by either spouse will remain separate property. Having such an agreement in place can provide clarity and protection in the event of a divorce.
Legal Considerations
It is important to note that state laws vary regarding the treatment of inheritance in divorce. For example, in community property states, all assets acquired during the marriage are presumed jointly owned, including inheritances if they are commingled and a separate property tracing is not provided. However, in equitable distribution states, courts aim to divide marital property fairly but not necessarily equally, giving more room for negotiation and legal argument.
Schedule a Consultation Today
If you are facing a divorce and have concerns about protecting your inheritance, consulting with an experienced family law attorney at Foster Hsu, LLP in San Jose, California, is essential. Our team can provide personalized guidance and ensure your interests are safeguarded throughout the divorce process. Contact us today to schedule a consultation and learn more about your rights and options.
Source:
selfhelp.courts.ca.gov/divorce/property-debts#:~:text=The%20“community”%20is%20you%20and,money%20you%20earned%20while%20married
