Dividing up assets during a divorce can be complicated.
For example, selling your house during divorce is difficult.
Understanding what happens to inheritances after a divorce is also challenging.
Read on for answers to common questions on this issue.
Do inheritances get shared in a divorce?
Inheritance received before marriage
If you received inheritance before marriage, it’s usually considered your separate property.
So, it’s not usually shared with your spouse in a divorce.
Inheritance received during marriage
Assets inherited during the marriage are generally treated as marital assets.
In other words, they could be divided between spouses.
This division can occur even if the inheritance was only for one spouse unless:
- The inheritance was in a trust
- There was a clear agreement that it shouldn’t be part of marital assets
- It was used for personal rather than marital purposes.
How timing and size of inheritance affect claims
Inheritances received during separation are less likely to be seen as marital property.
Smaller inheritances used for personal needs are often not divided.
By contrast, larger ones used for joint expenses (like home improvements) are more likely to be.
Inheritance mixing
Some inherited funds get mixed in joint accounts, or used to enhance joint property.
In these cases, they are more likely to be considered marital property.
Both parties can also claim any increase in property value due to the inheritance.
Impact of divorce type on inheritance
Each divorce is different. But most divorces are categorised as mutual or contenting.
Uncontested divorce
You can decide not to split certain assets in a mutually agreed divorce.
This includes inheritance, which allows one spouse to keep them as separate property.
Contested divorce
In a contested divorce, a judge will decide how to split assets. They might considering any inheritances as shared property.
The court is more likely to intervene in inheritance matters for contentious divorces. This can complicate settling.
Ex-spouse named in the will
If a will names an ex-spouse as a beneficiary, this entitlement doesn’t continue after divorce. Unless, of course, the will states otherwise.
Should you include inheritance in a divorce settlement?
Inheritances received during marriage are usually considered marital assets. So, many get included in the settlement.
However, there may be strategic reasons to handle them separately, such as:
- Limiting future legal disputes over the inheritance
- Negotiating to keep a larger share of the inheritance by trading off other assets.
Getting professional help
Navigating inheritance during divorce involves complex legal and financial issues. It’s essential to seek advice from:
- Legal professionals can define separate versus marital property. They can also help you understand your rights and represent you during negotiations
- Financial advisors can evaluate tax impacts. They can also help ensure the settlement supports your long-term financial security
- Forensic accountants can prove how the inheritance was used during the marriage. This evidence may be crucial in contested cases.
Conclusion
How an inheritance is treated in a divorce depends on:
- When it was received
- How it was used
- The specifics of the divorce proceedings.
Professional guidance is crucial. It helps you make informed decisions that protect your interests and financial future.