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Why is a commingled inheritance a problem?

On Behalf of | Jul 20, 2023 | Property Division

When you are given an inheritance, you may think of it as something that you personally own. Even if you share some of it with your spouse, it’s still money that came from your family.

If you get divorced, will that inheritance qualify as a separate asset? Is it actually something that you own or is it something that is owned by both you and your spouse, meaning that you would have to add its value to your marital estate, which will need to be divided? The crux of the issue may be whether or not you commingled that inheritance.

Mixing accounts together

Say that your inheritance is purely financial, like a gift of $100,000 from a parent or grandparent. Keeping the inheritance separate would mean storing it in an account that you owned yourself, whether this is a bank account or some type of investment. Commingling it would mean mixing the inheritance together with other funds in a shared account.

You may not have comingled an inheritance intentionally, as many people don’t even realize that they’re mixing their accounts. You may simply have a joint account that you share with your spouse. When you received the check for your inheritance, you may have deposited it in that account because that’s where you put all of your money.

This approach may make sense while you are married, but it’s important to note that commingling an inheritance could mean that you’ll need to divide it with your ex if you get divorced. It will likely be deemed a shared asset if you share it with them during the marriage. They can claim ownership rights, which they may exercise when you get divorced. Alternatively, if you keep the inheritance in a separate account the entire time, it’s much easier to show that the money belongs only to you and should not be divided with your ex. You could also draft a postnuptial agreement safeguarding your interests in your inheritance in the event of a divorce.

No matter how you choose to navigate the receipt of an inheritance, know that the choices you make now could impact your ability to treat this asset as separate property later on.