How to Safeguard Personal Inheritances

How to Safeguard Personal Inheritances


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How to Safeguard Personal InheritancesBoomers are inheriting assets from their parents. In fact, millions of Boomers stand to inherit upwards of $27 trillion over the next four decades. Some couples make it through the tough times of marriage. They emerge on the other side with a desire to share everything. These couples will probably never have to wonder how to safeguard personal inheritances from a spouse.

I got to wondering what happens to inheritances in a divorce. Couples headed for divorce need to worry. Unfortunately, by the time divorce appears inevitable, it may be far too late to safeguard personal inheritances from a spouse.

How to Safeguard Personal Inheritances from a Spouse

The firm Ayo & Iken has some advice about inheritances. The laws regarding what property you must share and what remains your own depends to some degree on whether you live in a community property state or an equitable distribution state. Alabama, like the majority of states in the U.S., is an equitable distribution state. A community property state splits assets right down the middle during a divorce.  An equitable distribution state splits assets fairly. That can be difficult during a contentious divorce. If the couple is unable to split their assets equitably, a judge will do it for them, based on a number of factors. Alabama handles marital property and separate property, such as inheritances, differently.

Marital property is everything earned or acquired during the marriage, by either party—unless you both agree otherwise. Marital property consists of the money earned by one or both of you; including the car you bought with money from your joint bank account, the home you bought, and even the portion of your retirement fund which you added to during your marriage. Separate property can include the following: considered marital property

  • The law says inheritances received prior to or during the marriage are considered separate property.  It becomes marital property if commingled during the marriage.
  • Any property acquired during the marriage in one spouse’s name, which was purchased using inherited money, and never used for the benefit of the other spouse or titled in the other spouse’s name will probably be considered separate property.

How an Inheritance Can Become Marital Property

While it may seem fairly straightforward, if you received a gift or inheritance before or during your marriage it remains yours. Unfortunately, it is not always so simple during a divorce.

Suppose you inherited a vacation house considered separate property. If you and your wife use it frequently and even add on to the place with commingled funds, it has become marital property.

According to Ayo & Iken, if you received an inheritance of money prior to your marriage, and did not protect the inheritance via a prenuptial agreement, then it might be considered marital property if you used the money to buy marital assets, if you added your spouse’s name to the account, or if you added marital funds to the account.

Any person who is contemplating marriage, who either has already received a significant inheritance or anticipates doing so, should consider a carefully crafted prenuptial agreement.

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