When Does An Inheritance Become Marital Property?

When Does An Inheritance Become Marital Property?

When Does An Inheritance Become Marital Property?

An inheritance typically becomes marital property when it is commingled with marital assets. Commingling refers to the mixing of separate property, such as an inheritance, with marital property, which can transform the separate property into marital property. This can occur in several ways:

  1. Depositing the inheritance into a joint account: If the inherited funds are deposited into a joint account shared with the spouse, the inheritance can be considered as commingled and thus becomes marital property.
  2. Using the inheritance for joint expenses or investments: If the inherited funds are used to pay off a joint mortgage, other joint debts, or used for joint investments, it can be considered as commingled and thus becomes marital property.
  3. Using the inheritance to improve jointly owned property: If the inherited funds are used to improve or maintain a property that is jointly owned by the spouses, it can be considered as commingled and thus becomes marital property.

However, it’s important to note that laws regarding inheritance and marital property can vary widely between states.

In community property states, for example, all property and earnings accumulated during a marriage are considered equal amongst the two people, but inheritances can still be considered separate property as long as they are not commingled.

In general, if an individual wants to keep their inheritance as separate property, they should avoid commingling the inheritance with marital assets.

This might involve keeping the inherited funds in a separate account, not using the inheritance for joint expenses or investments, and not using the inheritance to improve jointly owned property.
Do I Have To Share My Inheritance With My Spouse?

Whether you have to share your inheritance with your spouse largely depends on how you handle the inheritance and the laws of your state. In most cases, an inheritance is considered separate property, meaning you are not obligated to share it with your spouse. 

This applies whether you receive the inheritance before, during, or after your marriage. However, there are circumstances where an inheritance can become marital property, which would then be subject to division between spouses.

Process For Protecting An Inheritance From A Spouse

Protecting an inheritance from a spouse involves several steps and strategies, which can be particularly important if you anticipate a divorce or want to ensure that your inheritance remains your separate property. Here are some strategies you can consider:

  1. Avoid Commingling the Inheritance: The most straightforward way to protect your inheritance is to avoid commingling it with marital assets. This means keeping the inheritance separate from any joint accounts or assets you share with your spouse. If your inheritance is cash, you should keep it in a separate, private bank account, and avoid adding your spouse’s name to the account or making them an authorized user on any cards that draw from that account.
  2. Avoid Using the Inheritance for Joint Expenses or Investments: If you use your inheritance to pay off joint debts, make joint investments, or improve jointly owned property, it could be considered commingled and thus become marital property.
  3. Prenuptial and Postnuptial Agreements: These agreements can clearly define your separate estate and any potential inheritance, along with the rights and responsibilities of both spouses in the event of a divorce. They are particularly popular with individuals entering into second marriages to protect family inheritances and preserve their estate for their children from previous marriages.
  4. Establish a Trust: Trusts can be used to maintain and preserve your inheritance. They can serve not only as estate planning tools, but also as vehicles to mitigate the ramifications of a divorce. It’s important to understand the concepts of irrevocable vs. revocable trusts, how the trusts generate income, and whether or not that income could be included in calculations for child support and alimony.
  5. Create Your Own Estate Plan: You can consider hiring independent counsel to create a new estate plan that will limit what a spouse would receive in the event of death preceding or during a divorce.
  6. Document and Keep Proof of the Inheritance: It’s important to document and keep proof that you received an inheritance. This might involve keeping the will and any letters from the estate trustee confirming what you received, as well as proof that you deposited the inheritance into a separate account.

Remember, laws regarding inheritance and marital property can vary widely between states, so it’s recommended to consult with a legal professional to understand the specific laws and regulations in your state and how they might apply to your situation.

Is Inheritance Considered Marital Property In North Carolina Divorce?

In North Carolina, an inheritance is typically not considered marital property and is not subject to division during a divorce. This applies whether the inheritance was received before, during, or after the marriage. 

The North Carolina General Statute §50-20 defines separate property as real and personal property acquired by a spouse before or during the marriage through devise, descent, or gift, which includes inheritances. However, there are circumstances where an inheritance can become marital property.

This can occur if the inheritance is commingled with marital assets. Commingling refers to the mixing of separate property, such as an inheritance, with marital property. For example, if the inherited funds are deposited into a joint account shared with the spouse, the inheritance can be considered as commingled and thus becomes marital property.

Similarly, if the inherited funds are used to purchase or improve jointly owned property, it can also be considered as commingled and thus becomes marital property. In order to protect an inheritance from becoming marital property, it’s recommended to keep the inheritance separate from any joint accounts or assets shared with the spouse.

This might involve keeping the inherited funds in a separate account, not using the inheritance for joint expenses or investments, and not using the inheritance to improve jointly owned property. It’s also important to keep records of the inheritance and how it was managed.

However, it’s important to note that laws regarding inheritance and marital property can vary widely between states, and even within different circumstances in the same state.

Therefore, it’s recommended to consult with a legal professional to understand the specific laws and regulations in North Carolina and how they might apply to your situation.

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