Inheritance is an event that eventually happens in the life of many. When a family member becomes deceased, or even a close friend, an individual may inherit a piece of their deceased family member’s or friend’s estate.
The inheritance can be through the probate process in probate court where a Last Will and Testament existed. In other instances, there might be a non-probate transfer of inheritance. This can come by way of life insurance or other assets, like bank accounts, that have payable on death or transfer on death designations. With real estate, there might even be a beneficiary deed. When that is the case, the transfer of real estate can happen outside of the probate court.
No matter the circumstances, inheritance is almost always treated as separate property in a divorce. Thus, if one spouse received the inheritance alone, in the case of divorce, they would ordinarily get this inheritance free from any claims of their spouse.
There is a common scenario, however, that can blur these lines. The common scenario involves the commingling of the separate inheritance with marital property.
Take an instance where a party inherits liquid funds — either through a probate or non-probate transfer. Instead of putting this inheritance in a bank account in their name alone, what some parties do is place the inheritance in a marital bank account that also has their spouse’s name on it along with marital money.
When this is the case, commingling has occurred. By commingling, it means that the separate inheritance has been mixed with marital money. When that takes place, many family courts will treat all the money in the marital bank account, including the separate inheritance, as marital property.
Further, when the bank account has both spouse’s names on it, many family courts will also consider this marital property under the doctrine of transmutation. Transmutation is where separate property is treated as a donative gift to the marital estate because it was placed in a jointly titled account or, in the case of real estate, the inherited property is placed in the name of both spouses by a subsequent deed.
For parties who are receiving the inheritance, and they wish to keep that inheritance their separate property in the case of a divorce, it is vital to speak with an attorney before receiving these funds or property. Not commingling and/or transmuting the assets in the first place can be critical.
In cases where commingling has occurred, it might be possible to hire a forensic account in some cases to trace the separate property from the marital property, although in many cases, the damage might already have been done.
If you are going through a divorce with there are assets acquired by inheritance, Stange Law Firm, PC can help. You can contact us at 855-805-0595.