Inheritance and Divorce

When you get divorced, one of the issues you'll need to deal with is how to divide your property. You may agree on how to do that, as part of a comprehensive divorce settlement agreement or in a separate property agreement. If you can't agree, a judge will divide for you based on your state's laws on property division in divorce.

As a general rule, only marital property is divided in divorce, while the spouses keep their own separate property. Property that a spouse has inherited is typically considered separate property—but there can be a few exceptions to the rule.

Is My Spouse Entitled to My Inheritance in Divorce?

In the overwhelming majority of states, an inheritance is considered separate property, belonging exclusively to the spouse who received it. That means it won't be included in the property to be divided in divorce. That holds true whether a spouse received the inheritance before or during the marriage.

However, in a few states (such as Washington), judges will distribute both separate and community property in the divorce. Still, a judge may decide not to include separate property, like an inheritance, if that would be fair under the circumstances.

How Can a Separate Inheritance Become Marital Property?

Also, even if you live in a state where inheritances are considered separate property that's not usually divided in a divorce, you could change the character of an inheritance from separate to marital.

That could happen intentionally, in what's legally called a "transmutation of property." For example, say you inherit a house and then put your spouse's name on the deed. You both move into the house and share the costs of living there. In that scenario, you would be hard-pressed to convince a judge that the house was never intended to be marital property.

But an inheritance may become at least partly marital property in other ways as well. For example:

• Marital contributions to separate property. Say you inherited a house and never put your spouse's name on the deed. At some point down the road, however, you paid for improvements on the property with money earned during the marriage (marital property) or contributions from your spouse. When you get divorced, a judge might determine that—although the house itself may not be marital property—the increase in value due to the improvements is a part of the marital estate and thus subject to division between the spouses.
• Commingling. The most common example of converting an inheritance to marital property is when the inheriting spouse "commingles" (mixes) the inheritance with marital assets. This can be intentional, but it often happens by mistake. For example, Uncle Zeke passes on and leaves you $10,000 in his will. After you and your spouse break out the bubbly and toast the kindly gentleman, you put the money in an existing savings account that's in both your names, and which either of you can access at will. If you did that because you wanted to share the inheritance money with your spouse . . . great! Mission accomplished. But if you thought that putting that money in the joint account was just for convenience, and that it would always remain yours alone, you may have put yourself behind the proverbial eight-ball. By commingling the inheritance with marital funds, you've likely converted it into marital property. You can argue to the judge that this was never your intention, but you'll have an uphill climb.

Can I Claim My Ex's Inheritance Received After Divorce?

Sharing a spouse's inheritance after divorce is a nonstarter, unless your divorce judgment specifically addresses that topic.

That said, there is a situation where an ex-spouse's post-divorce inheritance could come into play. If you're receiving spousal support (alimony) or child support, you might be able to petition the court to increase the support amount, based on that inheritance or any interest income the principal is making.

Courts usually allow modification of support—both up and down—for a variety of reasons, such as a job loss, a spouse or child becoming disabled, or a spouse's substantial pay increase (again, depending on the laws in your state).

You'd first have to see whether your state views an inheritance as a potential basis for a modification request. If it does, you may have viable grounds to seek an increase in support. Of course, this is going to depend in large measure on how significant the inheritance is. Your best bet for success is when the inheritance has substantially enhanced your ex-spouse's standard of living.

Prenuptial Agreements and Inheritance

Couples often use prenuptial agreements (sometimes referred to as "antenuptial agreements") to protect assets they've accumulated prior to marriage. This is especially true with second marriages, where the couples tend to be older and may want to protect assets they've earmarked for their children.

A prenuptial agreement (prenup) is a binding contract that can often override state divorce law on many issues. A prenup provides the couple with an opportunity to settle in advance how an inheritance (and other property) will be treated in the future, including if a divorce occurs.

But be forewarned: There are strict rules governing the validity of prenups, so be sure to consult a knowledgeable attorney to help you draft and/or review one.