Protecting an inheritance in a divorce

by | Sep 29, 2020 | Estate Planning |

In most cases, any inheritance money that you receive is yours to keep regardless of your marital status. This is generally true whether you obtain the funds prior to getting married or during the course of a marriage. However, California law generally considers any assets that are commingled to be joint property.

How an inheritance could become joint property

Money that is inherited from a parent, grandparent or anyone else might be commingled if it is placed into a bank account that you and your spouse jointly control. The same may be true if inherited funds are used to pay joint bills or to make improvements to a marital home. These funds may retain their status as a separate asset after being commingled if you can prove that you never intended to share them with your spouse.

It may be wise to create a prenuptial agreement

If you plan on receiving a substantial amount of money from a family member, it may be a good idea to include that asset in a prenuptial agreement. This may ensure that the money retains its status as a separate item that is not to be divided in a divorce.

Your spouse generally isn’t entitled to your separate property

Assuming that you kept an inheritance in your name, your spouse typically has no claim to it during a divorce. This means that you are entitled to keep 100% of the money regardless of whether it was obtained before or after a marriage became official. It is worth noting that even if a separate asset is commingled, there is no guarantee that your spouse will attempt to claim a portion of that property in a final settlement.

A prenuptial agreement may be an effective estate planning tool for those who are concerned about keeping assets in their family. An attorney may be able to talk more about the potential benefits of these and other documents that help provide asset protection both now and in the future.