What Happens to an Inheritance During a Divorce

Splitting up money and assets during divorce rarely seems fair to either party. And if you have inherited a large sum of money from a relative or friend, you might feel even more concerned about the division: will you have to share that inheritance with your soon-to-be-ex-spouse? Whether you have to split that money depends on a few things:

• Timing
• How you managed the money when you received it
• Whether you have a prenuptial agreement in place
• Where you live

Inheritance During Marriage

An inheritance during the marriage is any assets left to you in a Will by a friend or family member, given at the time you are/were legally married. That inheritance does not have to mention your spouse for this to count as part of your assets during divorce. This inheritance is considered separate property — at first. The inheritance becomes joint property once it is deposited into a bank account shared by both partners or an account used to pay bills that benefit both partners. This is called co-mingling. The money also becomes joint property if used to benefit both parties, such as making improvements on the home.  

This is also true of non-monetary assets. Let’s say your grandmother gave you her wedding ring. That ring will be listed among assets that are divided between the two of you. While you may get to keep the ring, that may mean subtracting from a cash amount.

Inheritance Prior to Marriage

If your great uncle Joe left you money before you were legally married, this is your property. But again, if you moved this money to a joint bank account and shared it with your partner, it becomes shared.

Whether you inherit before or after the marriage, once the funds are co-mingled, it becomes difficult to prove that they are yours alone. In some cases, you may be able to retain a portion of that money as yours, but the burden of proof will be on you, and this type of problem is best addressed with your attorney.

Prevention is the Best Cure

Some states may differ on these points, but in North Carolina, you are likely to have to share your inheritance unless you took steps at the start to prevent it. One prevention step is a prenuptial agreement. If you and your spouse have a prenup, you may have listed future inheritance assets as part of that document. According to the Wall Street Journal, the number of prenuptial agreements is increasing for this very reason. If you do not have a prenup, speak with your attorney about what to do.  

If you do not have a prenuptial agreement, the best way to manage inheritance money is to put that money in a separate account that’s only yours. Doing so may seem unromantic, but it will prevent problems later if you and your partner part ways. Of course, you can decide to spend that money on shared goals or projects with your partner. But what remains in the account will remain yours no matter what the future brings.

If the item is not money, do what you can to protect your property by keeping titles and deeds in your name only and be sure to keep documentation that proves the inherited items are yours.

You can learn more or ask your specific questions in our Raleigh divorce workshop each month. Learn more or register today: https://www.secondsaturdaywakecounty.com/