When family members leave us an inheritance or give a gift, they usually want it to go to us. That’s true whether it’s money, jewels or a family heirloom. However, when a person finds themselves in the middle of a divorce, those things may become fair game in the settlement. Whether you are counting on inheritance money for your retirement years or want to keep your mother’s diamond rings for sentimental reasons, how do you prevent your soon-to-be ex from taking them?
In community property states like Louisiana, all marital property is considered to be owned equally by both spouses and is split in half in a divorce. Separate property, however, does not have to be divided.
Separate property includes inheritances and gifts given to one spouse. However, there are some caveats to that. It must have been owned by the spouse before the marriage or obtained after the couple officially separated. It may also not have been commingled with marital property.
That’s why it’s essential to keep any inheritance funds in a separate account in your name and not in a joint account with your spouse. If you use the funds to purchase something in both of your names, like a car, boat or home, that purchase becomes marital property.
Remember that you can designate something as separate property via a prenuptial or postnuptial agreement. If you have an inheritance or other property you want to protect in the event that the marriage ends, this yet another important reason to get a prenup.
Things can get particularly sticky is if you receive money from parents or family members, either as a gift or a loan, while they are alive. Parents often help out adult children during difficult times. If you are given or lent a significant amount of money, written documentation of whether it is a loan or gift and specifically to whom it is being given can save time, arguments and money later.
When young couples start out, they often using the resources they both have to build a life together, and probably can’t imagine ever battling over them in a divorce. However, sadly, that happens all too often. If you have inheritances and/or gifts, whether a significant amount of money or a sentimental remembrance from a long-lost loved one, it’s important to get legal and financial guidance on the best way to protect them.
Source: Forbes, “Divorcing Women: Here’s How to Protect Your Inheritances And Gifts” Jeff Landers, Nov. 19, 2014