You may be assuming that everything obtained during the marriage is considered marital property. There are, however, a few exceptions. One of those exceptions is an inheritance received during the marriage or the corpus of an inheritance received prior to the marriage. However, you must take steps to preserve the non-marital nature of the inheritance during the marriage so that it is not subject to distribution if a divorce were to occur.
In Pennsylvania, inherited funds that are kept in separate names and not comingled with marital property are considered a nonmarital asset. If the inheritance, for example, is placed in a joint bank account or used to purchase property under joint names, a court may determine that the inheritance has become a marital asset.
If you have received an inheritance and are considering a divorce, consult with a divorce attorney and review some of the following considerations:
Keep separate accounts. If you receive an inheritance and deposit that inheritance into a joint account with a spouse, it may be considered marital property. Maintaining the inheritance in a separately titled account in your name only helps to preserve the non-martial nature of the inheritance. Also, any taxes that are incurred from the inheritance should be paid by way of separate, non-marital funds.
Paperwork matters. If the inheritance includes property and other valuable assets, make sure that you obtain and maintain paperwork noting ownership in your name only. Work with a divorce attorney and a separate financial manager who know best practices. Your financial manager can create separate accounts in your name only and help with documentation as to the source, amount, and purpose.
Increases in value may be shared. The growth and value of the inheritance can be included in marital assets. For example, if you inherited $200,000 and it grows to a value of $210,000, that extra $10,000 may need to be divided with a spouse. Even with property, any increase in its value during the course of a marriage may be subject to equitable distribution. Note that a prenuptial or postnuptial agreement could protect any gains on your nonmarital assets, stipulating that they are not included for division in case of divorce.
Create a Trust. Anyone or anything can be the beneficiary of a trust, so if you have an inheritance or family gift that you would like separate from your marital property, a trust may ensure that it stays with you in case of a divorce. If you pre- decease your spouse, this asset will go to the beneficiary.
The financial outcome of a divorce is never certain. Discussing how to protect your inheritance rights with a good divorce attorney is fundamental to protecting your future economic interests and fair distribution of property. For more information on high net worth divorces and complex property division considerations, contact us online or call our office in Pittsburgh, Pennsylvania at 412-261-4040.
