Inheritances are tricky beasts.
In and of itself, an inheritance is not marital property. It is separate property. That means that absent certain circumstances, your inheritance cannot be split in your divorce.
Florida Statutes Section 61.075 (6)(b) provides:
(b) “Nonmarital assets and liabilities” include:
1. Assets acquired and liabilities incurred by either party prior to the marriage, and assets acquired and liabilities incurred in exchange for such assets and liabilities;
2. Assets acquired separately by either party by non-interspousal gift, bequest, devise, or descent, and assets acquired in exchange for such assets;
3. All income derived from nonmarital assets during the marriage unless the income was treated, used, or relied upon by the parties as a marital asset;
4. Assets and liabilities excluded from marital assets and liabilities by valid written agreement of the parties, and assets acquired and liabilities incurred in exchange for such assets and liabilities; and
5. Any liability incurred by forgery or unauthorized signature of one spouse signing the name of the other spouse. . . .
Florida is an Equitable Distribution state.
Equitable distribution is how assets and liabilities are divided in Florida divorces. (In community property states, assets are split 50/50, or equally. In equitable distribution states, the assets are split according to what’s fair. Equal isn’t always fair.) In Florida, only marital assets and liabilities are up for grabs with equitable distribution.
You see how I said “absent certain circumstances” above? Well, that’s where it gets a little tricky.
An inheritance — or a portion thereof — can become marital property if it’s commingled, or combined, with marital property.
For example, let’s say you receive an inheritance of real property (a vacation home). That vacation home is your separate property. You want to spruce it up a bit, so you use some of your earnings from employment or other assets (investments, etc.) acquired during the marriage (i.e., marital property) to make improvements on the home.
Because you used marital property to improve your separate property, your inheritance now has both separate property and marital property components. So if you divorce, your spouse will be entitled to a portion of the inheritance that was improved with commingled funds.
Similarly, if your inheritance was monetary, and you use part of the money to pay off a debt accumulated during the marriage, or to purchase marital property, your inheritance will likely be considered [at least partly] marital property in your divorce.
On the other hand, if you inherit a property and you rent out that property, both the property itself and the income generated by the property are considered your separate (non-marital) property, so long as they are not commingled with marital funds or assets.
Inheritance and Alimony
Another important note is that while an inheritance may remain separate property for equitable distribution purposes, its value may still be taken into consideration by the courts when making a determination of your ability to pay alimony.
Florida courts start the alimony discussion by answering two questions:
- Does one party have a need for alimony? and
- Does the other party have the ability to pay it?
When answering the “ability to pay” question, the courts may factor in your inheritance. (On the flip side, they can also consider it if your spouse received a substantial inheritance that would impact their need for alimony.)
How to Keep Your Inheritance Separate from Marital Property
If you don’t want your inheritance to be shared with your spouse in the event of a divorce, you need to take some precautions. Here are two very important recommendations:
1. Do not commingle funds.
If your inheritance is monetary, keep it in a separate bank account in your name only (perhaps even title the account [Your Name], Inheritance Account), and do not use any of the inherited money to benefit the marriage in any way. If your inheritance is a property, do not use marital funds to improve upon it, do not use the property for family vacations or income from the property to benefit the marriage.
Questions about what “benefits the marriage”? Call today for a FREE consultation. (561) 748-8000
This is tough, and gets tougher the longer you’re married. Which is why I highly recommend #2:
2. Sign a Prenuptial Agreement.
If you have received an inheritance (or expect to receive one in the future) and you want to ensure your inheritance is immune from being split in a divorce — but you’re not married yet — my recommendation is to have a prenuptial agreement drawn up to protect those assets.
If you’re already married, you could potentially sign a postnuptial agreement as well, as long as the inheritance has not been commingled with marital assets.
Call today for a FREE consultation about how to keep your inheritance as separate property. (561) 748-8000