Dividing up assets during a divorce can be complicated.
Understanding what happens to inheritances after a divorce is often particularly challenging.
This guide aims to clarify common questions about 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. This means they could be divided between spouses.
This division can occur even if the inheritance was meant only for one spouse unless:
- The inheritance was kept in a trust, or there was a clear agreement that it shouldn’t be part of marital assets
- It was used specifically 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. However, 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 the inheriting 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 more contentious the divorce, the more likely the court will intervene in inheritance matters. 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.
