When you and your partner decide to split or divorce, the assets you acquired during your marriage become your net family property and are subject to equalization, with a few important exceptions. However, in order to avoid dividing, assets that are considered gifts or inheritances can be removed from the net family property. Because of this, it can be crucial to appropriately protect any gifts or inheritances you earned throughout your marriage. If you need help regarding storing gifts and inheritances during divorce, contact the Law Office of David J. Rodriguez, PLLC.
Why is it the best idea to keep inheritances and gifts apart from joint assets?
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Avoid Using Gifted or Inherited Money for a Matrimonial Home
When it comes to a marital residence, it is essential to use gifted or inherited funds responsibly. If funds were utilized for buying or maintenance of a marital home, they may be part of your net family property. This involves gifts and estates. In the case of a separation or divorce, the money will no longer be excluded from equalization and will instead turn into a shared asset.
You can write a domestic agreement or marriage contract that explicitly states that you want to protect gifts or inheritances from equality in the future, even if you would like to contribute them to a married home.
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Keep your inheritances and gifts in various holdings or accounts.
As long as gifts and inheritances are maintained entirely separate from your spouse, they are technically exempt from equalization under the Family Law Act. If you have inherited money or received a gift, it should be kept in a separate bank account for the course of your marriage. As long as every asset remains entirely in your own name, you are permitted to invest money that you have been given or inherited in other assets, such as real estate.
Gifts and inheritances that are held in shared accounts or assets that you and your spouse share could be included in your net family property upon your separation and could be equalized.
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Record the gifts and inheritances you have received, along with how you got to receive them.
Gifts and inheritances must be able to be tracked back to their source in order for them to be removed from your net family property. If there are any official documents or wills that indicate that the money or property you have received is, in fact, a gift or an inheritance, you might want to keep a copy of them. These papers could make sure that your assets are not balanced in the case of a divorce or separation.
Moreover, gifts and inheritances cannot be returned to you if they were not yet in existence on the date of your separation.
How Intent works?
Whether an inheritance is considered separate or jointly owned by a divorce court relies on the intention. Documents such as account statements that describe the spending of inheritance funds will be maintained by a spouse who intends to keep the funds separate, as they will serve as evidence of the anticipated separation. Documentation may, at times, take the form of private correspondence.
For example, if a person’s spouse made required improvements on a house they inherited themselves, this sweat equity could make the residence joint property. But the house may remain private property if the surviving spouse could prove that repairs were made only in spite of their concerns.
Wrapping up
In contrast to a great deal of property acquired by spouses during their marriage, inheritances do not count as jointly owned marital property and can be kept apart. But for that to take place, certain events must happen, such as keeping inherited property independent of marital property and abstaining from using it for the other partner’s advantage or the couple’s everyday demands. Given that state laws vary, the only person able to provide clear advice on inheritance during a marriage is an attorney with experience in that state’s legal system.
