Dividing assets in a divorce is a complex process, especially in high-asset cases. One of the most sensitive issues in these divorces is inheritance. Inheritance can be a significant part of an individual’s wealth, and it may be subject to division during divorce proceedings. However, legal protections exist to safeguard inherited assets.
Protecting inherited assets through prenuptial agreements
Prenuptial agreements are an effective way to protect inherited property from being divided in a divorce. A well-drafted prenup can clearly outline that any inheritance received by one spouse remains their separate property, even if the marriage ends. To be enforceable, the agreement must be made voluntarily, with full disclosure of assets, and executed under state laws.
State laws on inherited assets
The protection of inheritance can vary depending on the state. In community property states, any property acquired during the marriage is typically considered marital property and subject to division. However, inheritance is usually excluded from this classification. In equitable distribution states, courts may consider the inheritance as separate property but may factor it into the overall division of marital assets if commingled with joint property or used for joint purposes.
Commingling of inherited asset
If inherited assets become commingled with marital property, they may lose their protected status. For example, if an inheritance is deposited into a joint account or used to buy property in both spouses’ names, it could be considered a marital asset. To protect an inheritance, it’s crucial to keep it separate from joint funds and maintain clear records of its source.
Court discretion in high-asset divorces
In some cases, even if assets are protected by a prenuptial agreement or state laws, a court may still have the discretion to divide them. Courts in high-asset divorces often have more leeway in determining what is fair and equitable, depending on the circumstances of the marriage and divorce.
