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Can I lose my inheritance during divorce?

On Behalf of | Feb 4, 2022 | Divorce

Passing valuable assets on to heirs is a time-honored tradition in which many Minnesota families take pride. Unfortunately, some families overlook important steps that may prevent the splitting up of inheritances or of taking them out of the family altogether. For example, your inheritance could be vulnerable during divorce.

It is first important to understand how the court divides property during a divorce. The court will divide property into two categories — marital and separate. Marital assets are anything jointly owned, which you will have to divide. Your separate property is anything that you own but your spouse does not. This property is not part of the property division process.

Is my inheritance separate or marital property?

In general, an inheritance is considered separate property when gifted to just one person. This means that, if your loved one bequeathed something to just you — rather than you and your spouse — it is your separate property. Unfortunately, there are some exceptions to this rule.

Your inheritance can potentially make the leap from separate to marital property. It all comes down to how you treat your inheritance after receiving it. If you mix your inheritance with your marital assets, it may no longer be separate. Also known as commingling, this might look like:

  • Depositing your inheritance into a joint marital bank account.
  • Using your inheritance to pay for regular household needs, such as groceries.
  • Paying marital bills with your inheritance.

Ideally, you want to keep your inheritance as separate from your marital property as possible. One approach is to deposit any inheritance funds into a separate bank account. You should also exercise caution in how you use the funds.

What if I received it before marriage?

The same commingling principles apply regardless of when you received your inheritance. If someone bequeathed money to you before you said “I do,” but then you used those funds for marital purposes, it would likely end up as marital property and vulnerable to the property division process.

Protecting yourself and your assets is probably your top priority during divorce. However, there is often much confusion when it comes to complicated assets like inheritances, businesses and more. One approach to minimizing this confusion is to take the time to learn more about Minnesota family law and how it affects the divorce process.