Divorce is complicated and understanding how assets are classified and divided is key. In community property states like Texas, assets acquired during the marriage are typically divided equally between spouses. Marital and separate property is a big part of that. Inheritances often raise questions about whether they’re marital or separate property. You need to understand the legal framework and strategies to protect an inheritance during a divorce and keep it with the right person.
This blog will walk you through how inheritances are treated in divorce, how to protect them, and why you need to work with a marital property division lawyer in The Woodlands.
Marital vs. Separate Property in Divorce
In divorce, the difference between marital and separate property is key to the division of assets.
Marital Property
Marital property is assets and debts acquired by either spouse during the marriage. This includes but is not limited to income earned by either spouse, property purchased with that income, and other assets acquired during the marriage regardless of whose name is on the title. The principle is that both parties have contributed to the marriage and therefore should share in the assets.
Separate Property
Separate property is assets owned by either spouse before the marriage, as well as inheritances and gifts given to one spouse during the marriage. These assets are typically considered separate property and are not divided in divorce as the assumption is they belong to the individual spouse. Inheritances are generally regarded as separate property, particularly under Texas law, unless they are commingled with marital assets. Classifying property as separate can have a big impact on the financial outcome of a divorce as it can protect certain assets from being divided.
Marital vs. Separate Property
However, the lines can get blurred over time especially when separate property is commingled with marital assets or used for marital purposes. In that case, what was once a separate property can be reclassified as marital property and divided. Understanding these subtleties is key for anyone going through a divorce as the classification of assets will impact the division of property and the settlement.
Inheritance Rule
Inheritance is a big part of divorce and understanding how it’s treated under the law is important for both parties.
Inheritance as Separate Property
Under most laws, inheritance is separate property. This means any inheritance received by one spouse during the marriage is not divided in divorce. The reason for this rule is that inheritance is meant to benefit the individual receiving it not the marital estate as a whole. So assets inherited generally stay with the recipient as long as they’re kept separate from marital assets. To ensure that an inheritance remains separate property, it is crucial to keep it in a separate account and avoid using it for marital expenses.
Situations Where Inheritance Becomes Marital Property
Although the general rule, there are situations where inheritance can become marital property. This reclassification can happen if the inheritance is commingled with marital assets or used for marital purposes. For example, if an inheritance is deposited into a joint bank account or used to pay for joint expenses, it may lose its separate property status. The court may then view the inheritance as a contribution to the marital estate and divide it in divorce.
Why Separate Status Matters
To keep an inheritance separate you must keep it separate from marital assets. This means separate accounts and not using inherited funds for marital expenses. Proper documentation and careful management of inherited assets will prevent them from being classified as marital property and divided in a divorce.
Factors That Influence Classification
The classification of assets in a divorce, particularly when it comes to inheritance, is not always straightforward. Several factors can affect whether an inheritance is considered separate or marital property, impacting the outcome of the division of assets.
Commingling of Funds
One of the main factors that can affect the classification of an inheritance is commingling of funds. Commingling occurs when inherited assets are mixed with marital assets such as depositing inherited money into a joint bank account or using it to buy a jointly owned asset. Once commingled it’s hard to separate separate and marital property. The court may view the commingled inheritance as part of the marital estate and divide it as joint property in divorce.
Using Inheritance for Marital Expenses
Using inheritance for marital expenses is another factor that can change its classification. If inherited assets are used to pay for marital expenses – such as mortgage payments, home improvements, or family vacations – the inheritance may be considered a contribution to the marital estate. Using the inheritance for marital purposes can blur the lines between separate and marital property and potentially divide the inheritance with other marital assets.
How Long Inheritance Is Held
How long an inheritance is held can also matter. Generally, the longer an inheritance is kept separate without being commingled or used for marital purposes the more likely it will stay separate. But even if an inheritance has been separate for a long time if it’s used for marital purposes or commingled it can still be reclassified. It’s important to be aware of how you manage inherited assets to avoid unintended consequences in divorce.
How to Protect Inheritance in Divorce
Protecting inheritance in divorce requires proactive steps and management. Knowing the legal options to protect these assets will make a big difference in keeping them separate.
Keep Inheritance Separate
To keep an inheritance separate, you must keep it in a separate account from marital assets. This means not depositing inherited funds into a joint account but rather keeping them in a separate bank account. By keeping separate accounts and not commingling inherited assets with marital property, you can keep the inheritance separate and not divide it in divorce. Keeping the assets clear will help keep the inheritance separate.
Document Inherited Assets
Documentation is key to protecting inherited property. Keep detailed records of how and when the inheritance was received and any transactions with the assets. Documentation should include statements showing the inherited funds were deposited into separate accounts and records of any investments or purchases made with those funds. This will be a paper trail to prove the inheritance is separate and make it easier to defend in divorce.
Prenup or Postnup?
Prenups and postnups are great tools to protect inheritance in divorce. These legal documents can state that any inheritance received by either spouse will be separate property no matter how it’s used during the marriage. By outlining the terms of inherited assets in these documents you can avoid property disputes and add security for both parties. Consult with a lawyer to draft or review these documents to make sure they are enforceable and tailored to your needs.
Seek a Lawyer
With all the complexity involved in protecting an inheritance, it’s often best to get a lawyer. A family law attorney can guide you on how to keep the inheritance separate and represent you in divorce. Get a lawyer especially if you have concerns about commingling or the inheritance has already been used in a way that could jeopardize its status.
Speak With a Woodlands Marital Property Division Attorney ASAP!
If you are facing a divorce and have concerns about protecting your inheritance, don’t leave your financial future to chance. Contact our team at Bolton Law today to ensure your rights and assets are safeguarded.
Call us at 281-351-7897 for a free case review today!
