One issue that may come up during a divorce is what happens to money and assets that were received as an inheritance. It is one type of asset that can be quite tricky to split up, which is why you want to know the following things about it.
Know About Separate And Marital Property
It's common for all income earned and assets purchased during a marriage to become marital property. This means that the asset must be divided between both spouses through the divorce process. While cash is very simple to divide, property is hard to divide due to the need to assign a value to it and have enough cash on hand to buy out the other person's share of the property.
What is different about an inheritance is that it is generally considered to be an individual asset. While there are some situations where that inheritance can become marital property, it starts as individual property that cannot be divided during a divorce.
Know About Commingling Of Inheritances
The way that an inheritance becomes confusing in terms of ownership is when the inheritance is commingled with the rest of the marital assets. The easiest example to understand is if a house was inherited and the property was used by the family to live in. The house is clearly being used as a marital asset and would be considered marital property. If the person that inherited the home decides to not live in it and sells the home, then it is individual property that belongs to them.
Know About Tracing Separate Property
It's important to have a paper trail that identifies how an inheritance belongs to a separate person. This is why any cash should be kept in a separate bank account so that it is away from marital assets. Once the money is all in the same account, it is hard to trace what money is being spent on marital bills and expenses and what is not.
Even if the funds are kept in their own bank account, spending money from that account on marital assets can make the bank account a marital asset. This is common if someone uses that money to pay the property taxes or a mortgage. There is a separation of the accounts, but the money is being used for a shared marital purpose.
Reach out to a divorce attorney in your area for more information.