The inclusion of inheritance in a divorce settlement is conditional on many variables specific to each marriage. Assets in a divorce are either matrimonial or non-matrimonial. Matrimonial assets, which were acquired during the marriage, go into the pot of assets which can be divided between spouses.
How is an inheritance treated in a divorce?
Steps you can take to keep inherited assets separate include:
- Documenting that the inheritance is for you alone
- Creating separate accounts to hold inherited assets
- Setting up a trust to hold assets
- Executing a prenuptial or postnuptial agreement
- Limiting your spouse’s access to and use of the asset
How to protect an inheritance from being divided in divorce?
- Setting up a new separate account to receive the assets;
- Refraining from putting any other assets into the account holding the inheritance, even temporarily; and
- Refraining from commingling the inheritance with any marital assets.
Is an inheritance subject to Division in a divorce?
The inheritance may then be included with the rest of your marital property, subject to division. Keeping your inheritance separate is the best way to protect your assets. If you do end up commingling the inheritance, you may still be able to keep the inheritance as long as you can show proof that it is your separate property.
Do inheritances get divided in a divorce?
Instead, inheritances are treated as separate property belonging to the person who received the inheritance, and therefore may not be divided between the parties in a divorce. However, if it's shared between spouses, an inheritance can be treated differently based on rules that vary greatly among the states.
What happens to money inherited from spouse?
Money inherited by one spouse during a marriage is generally treated differently than other money that comes into a marriage. Typically, when one spouse earns money during a marriage, that income is the property of both spouses. However, with inheritances, whether both spouses are entitled to part of the money will depend on a number of different factors. If you are expecting an inheritance or have received an inheritance and are considering divorce, you will want to talk with a knowledgeable attorney to help you protect the property.
How to make sure your inheritance remains yours?
One of the safest ways to make sure that your inheritance remains only yours is through a pre- or post-marital agreement. These agreements can lay out any understandings about marital and separate property. It is also important that you save any documentation that you have about bank accounts, investment accounts, and/or tax returns. ...
What is the difference between marital property and separate property?
One of the major concepts in divorce law is the difference between marital property and separate property. Marital property is property that is jointly owned by the couple. Separate property is owned by only one of the spouses, and thus is not subject to division during a divorce.
What to do if you are expecting an inheritance?
If you are expecting an inheritance or have received an inheritance and are considering divorce, you will want to talk with a knowledgeable attorney to help you protect the property.
Can separate property be marital property?
Separate property can become marital property if it is commingled with marital property. For example, if you are left an inheritance and you put in in a separate bank account in your name only and you use it only for personal expenses or personal investments, it will probably still be considered separate property.
Can inheritance be divided?
If the inheritance becomes marital property it will be subject to division upon divorce. It is also possible for some of the funds to keep their characterization as separate property and some to become marital property. A large part of the inquiry will depend on the intentions of the party.
Is inheritance considered marital property?
Most of the assets that are acquired by either party during a marriage are automatically considered marital property. Inheritances are separate property provided that the property is kept separate. However, state laws vary. Some states are reluctant to recognize separate property in the majority of situations.
Inheritance after divorce
Generally speaking, the Family Court will apply wide discretion and inheritances will be assessed on a case by case basis and depend on the circumstances of your particular case.
Timing of the inheritance
If inheritance was received later on in the relationship or post separation, the court will treat it as a financial contribution by the spouse, but not always. Unless for unusual circumstances, a party may not be seen as contributing significantly towards an inheritance received later on in a relationship or post separation.
Size of asset pool and inheritance
Depending on the size of the asset pool available for distribution, it could possibly change the way courts view a post separation inheritance.
Global approach vs asset by asset approach
The court can consider a ‘global’ approach which amounts to all of the assets being pooled, and subsequently divided in accordance to the principles set out in sections 79 (4) and 75 (2) of the Family Law Act 1975.
Leading Court Decisions
The asset by asset approach was endorsed in the Full Court- In the marriage of Bonnici [1991] FamCA 86 and later re-affirmed again in Bishop v Bishop [2003] FamCAFC 138.
Additional considerations
The courts will also consider the disparity of the parties’ income earning capacities and if a family member made substantial financial contribution after separation because of the inheritance they received post separation.
Contact a Family Lawyer
If you are facing questions and confusion surrounding inheritance received late or post separation and would like legal advice specific to your family law matter, please feel free to contact our Gold Coast and Sydney family lawyers for a free confidential initial consultation.
How to protect your inheritance from divorce?
Where an individual may want to protect their inheritance from a claim during divorce proceedings, the ideal scenario is to enter into a prenuptial agreement before marriage or a post-nuptial agreement if the inheritance occurs during the marriage.
What are the considerations for inheritance?
Other considerations will include: How long you and your spouse were married. Whether inherited assets were transferred into joint names or if the couple or family benefited from the use of the inheritance.
What happens to a couple's assets when they divorce?
When a couple marries, many solely owned assets (or pre-acquired assets) will change in nature and may become treated as joint assets. These so-called matrimonial assets can then be contested in the event of a divorce, with both parties claiming a right to a share.
Is inheritance a joint asset?
It may be deemed a joint asset if it was, for example, deposited into a joint bank account. The court can reasonably assume that the inheritance benefited the family, rather than the individual whom the inheritance was bequeathed to.
Can a court decide when an inheritance was granted?
The court will also base its decision on when the inheritance was granted. If the inheritance was received before the marriage and the other spouse benefited (for example, the inheritance was used to secure other assets, they may be able to make a claim).
Can you inherit assets in divorce?
Future Inheritance and Divorce. Typically, the parties’ future inheritance prospects do not become assets under consideration in the event of divorce. Again, however, there are exceptions. If the inheritance is imminent and/or likely to be substantial, the court may take this into account when determining the division of marital assets.
Can Your Spouse Take Your Inheritance?
As a result, inheritance is not automatically excluded, and the courts do have powers to make it available to ex-spouses in certain circumstances.
Can an inheritance be ringfenced?
If the inheritance was received prior to the marriage and the recipient has kept this wholly separate and external to the marriage, there would be a strong argument for the recipient to keep it and for the inheritance to be “ ring fenced”, provided that there are sufficient matrimonial assets to satisfy both parties reasonable needs.
Can you bequest future inheritance?
Usually future inheritances are not taken into account due to the uncertain nature of such potential benefits. However, they may be if it is expected that the person making the bequest will die in the near future and the bequest is likely to be substantial. Sometimes Courts may even adjourn the proceedings until the inheritance is received.
What happens if one spouse inherits money but uses the funds to build a stock portfolio?
If one spouse inherits money but uses the funds to build a stock portfolio and then spends their own time actively managing that portfolio, they have inadvertently converted this money from separate property into a hybrid property.
What factors affect how a couple's property is divided?
Another essential factor that will impact how a couple’s property is divided is whether the property belongs to the marriage or spouse. A couple of definitions to keep in mind:
What can an experienced divorce attorney do?
An experienced divorce attorney can help you get the legal help you need, the answers you want, and the best options to fight for the property and assets you deserve. Your divorce doesn’t have to be difficult and long just because inheritance is involved. If you live in Virginia and are considering or going through a divorce, ...
What is the equitable division method in Virginia?
This means that if a couple cannot agree on a fair division of property, the court will decide what is fair based on a hearing or trial that will look at the entire picture of the couple’s finances.
Can inheritance be involved in divorce?
An experienced divorce attorney can help you get the legal help you need, the answers you want, and the best options to fight for the property and assets you deserve. Your divorce doesn’t have to be difficult and long just because inheritance is involved.
Can you share inheritance in divorce?
Each inheritance’s value can thus be appealing to both parties in a divorce, as one person might see the monetary value as something they should get to share.
Can the court increase the share of a spouse's marital property?
Additionally, the court can increase the other spouse’s share if one spouse does something to depreciate the marital property.
What factors are considered when determining what is equitable?
These may include each spouse’s economic standing, the value of property–both separate and marital, who has custody of the children, etc.
Is inheritance separate from property?
Property acquired by gift or inheritance is considered separate property. However, just because your inheritance may be separate property and will not be up for division, this is not to say that it won’t affect your property division settlement. In fact, one of the factors that a court considers, as mentioned above, ...
Is marital property separate from separate property?
As mentioned above, a court will consider marital and separate property in making a property division determination. Only marital property–that is, property that was acquired by either spouse during the course of the marriage–is actually up for division. While nearly all property that a spouse acquires during a marriage is marital property, ...
How can I protect inherited assets in a divorce?
One of the most asked questions we receive in regards to inheritance and divorce is how to protect an inheritance from divorce.
Should inheritance be shared with a spouse?
Although there are many legalities regarding inheritance and divorce, many individuals will have their own opinion in regards to whether they should share it with their spouse when divorcing.
Are future inheritances considered in a divorce settlement?
In general, potential future inheritances are not taken into account when it comes to deciding a financial settlement.
Are inherited assets split upon divorce?
If money is inherited by either husband or wife during the marriage, whether or not it will be added to the matrimonial pot will depend upon several factors, including:
What happens to inheritance before divorce?
Whether inheritance is passed down in the form of monies, shares or property, assets inherited by a single partner before or during a marriage can quickly become the focal point of divorce proceedings where they amount to a sum of any significance.
What factors determine the value of a financial settlement?
The over-riding factors a Judge considers when deciding upon the overall value of a financial settlement is whether that settlement is fair and just for both parties and whether it will meet the long term needs of both parties following the divorce. In cases where the value of assets in the matrimonial pot is relatively low a Judge is more likely to consider it necessary to include inherited assets in a settlement to ensure each parties’ long-term needs are met.
Is there a rule for inheritance?
There are no clearly defined rules set out in Family Law as to how any inheritance should be dealt with for the purpose of financial settlements and in addition to this, under s25 of the Matrimonial Cases Act 1973, Judges have discretionary powers which can cause further ambiguity.
Can a judge ring-fence an inherited estate?
Where the value of matrimonial assets is of a reasonable level, Judges can use their discretion to ring-fence all or part of an inherited estate from being included in a divorce settlement.
Is a matrimonial home an asset of the marriage?
Should the matrimonial home form part of an inherited estate, or be fund ed by the estate, a family law court Judge is unlikely to exclude this as an asset of the marriage except for in the most exceptional of circumstances.
Past Inheritances and Divorce
- There are some important facts related to past inheritances and divorce proceedings that will affect the outcome of any settlement. These key questions include the size of the inheritance, the date it was received, how it has been used, the financial situation of each party, and if there are any children involved. Inheritance that is transferred to...
Future Inheritance and Divorce
- Future inheritances are usually more straightforward to deal with in divorce procedures than past inheritance. Oftentimes, a future inheritance is not considered when assessing the financials of a divorce. In cases where the bequest is likely to pass away in the short-term future and the inheritance is considerable, this may be viewed differently. It’s not uncommon for courts to post…
Inheritance and Divorce in Virginia
- In Virginia, inherited property is categorized as distinct, even if it’s received during the marriage. The court can only divide marital property and is not able to interfere with your inheritance. This means you will be able to keep your full inheritance. As long as your inherited property remains separate from other assets, analyzing your inheritance is rarely met with complications. Where p…