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Is Inheritance Marital or Separate Property?
If you received an inheritance or are looking for a way to protect your children’s inheritance, you may be wondering how inheritance is split in a divorce and whether it can be protected. Under Florida’s equitable distribution laws, inheritance is typically classified as separate property, making it ineligible for property division.
According to Florida Statute 61.075, nonmarital assets include “assets acquired by either party by noninterspousal gift, bequest, devise, or descent, and assets acquired in exchange for such assets.” Furthermore, income derived from nonmarital assets (including inheritance) is likewise considered nonmarital property. This means that if you inherited a piece of property that you then rented out, the income you receive from that inherited rental property is considered separate property in the event of a divorce.
However, there are situations in which an inheritance may be subject to the property division process.
Equitable Distribution
Because Florida is an equitable distribution state, property and assets do not have to be split 50/50 during a divorce. Instead, the courts look at the situation and determine what is most fair to both spouses. While inheritance may be classified as separate property and therefore not subject to division, the courts may consider it when deciding what is fair.
For example, suppose one party has a significant inheritance while the other spouse has very limited financial holdings. In that case, the court may decide that more marital property will go to the financially disadvantaged spouse. Similarly, if the courts determine that the other spouse has put effort into increasing the value of the inheritance, even if it is classified as separate property, they may award them more marital property to keep things equitable.
How Commingled Property Is Handed During a Divorce
A major factor impacting how an inheritance is handled during a divorce is the commingling of separate and marital property. For example, while inheritance is considered individual property, if it was commingled with marital funds or used to contribute to household assets (such as using inheritance to purchase the marital home), some of that inheritance may ultimately be classified as marital property. Even the simple act of placing your inheritance in a joint account that you share with your spouse can cause the inheritance to be classified as marital property and not separate.
Dealing with commingled funds can be incredibly complicated and requires a significant amount of research into where various funds came from, how they were spent, and whether they can be separated back out again. Part of this process can include reviewing bank records, property appraisals, asset valuation, and even selling property purchased with commingled assets.
Suppose you are in a situation where you have commingled your inheritance with marital property. In that case, you should consult with an experienced attorney right away to ensure that the inheritance is handled correctly during property division negotiations. A skilled attorney will also have access to important resources to help you, like financial advisors and forensic accountants.
Review our blog to learn more about how inheritance is classified in Florida.
Can Inheritance Be Protected from Divorce?
Whether you are planning to divorce now or looking for ways to secure the future, knowing what will happen to an inheritance in the event of a divorce is crucial. It is often important to families that certain assets stay with the person who inherited them and may want to avoid important family assets being sold or divided if the unexpected happens, like a divorce. Keep reading to learn how to protect your inheritance from divorce.
Marital Agreements
One of the best ways to protect your inheritance (and other individual assets) is to establish a prenuptial agreement before getting married. A prenuptial agreement is a written agreement between future spouses. In it, you can identify the property that will remain separate in the event of a divorce, including your inheritance. If you receive an inheritance after your marriage, you can also develop a postnuptial marital agreement in which you and your spouse agree to keep the legacy separate from your marital property.
Marital agreements can be particularly useful for protecting non-monetary or sentimental assets, like family jewelry and engagement rings. You can stipulate in your prenuptial agreement that specific pieces of inherited family jewelry given to your spouse as a gift be returned if you and your spouse divorce.
In addition to sentimental items, marital agreements can be incredibly helpful when protecting family businesses. To learn more about protecting your family business from property division during a divorce, review our blog, “Ways to Protect Your Business from a Divorce.”
Trusts
Another way to safeguard your inheritance is to place it in a trust. A trust may be especially beneficial for those looking to protect an inheritance for their children. By placing the funds in an irrevocable trust and ensuring that only separate funds are used to establish the trust, you may be able to safeguard the inheritance from the property division process. However, if the trust is commingled with marital assets in any way, it may be considered marital property. Therefore, you need to work with an experienced attorney to ensure that the trust is set up correctly.
At The Virga Law Firm, P.A., we have helped many divorcing couples deal with their inherited property, and we are prepared to help you, too. Send us a message online to discuss your situation with one of our experienced lawyers today.