My husband and his sister both inherited when their parents died ten years ago. My husband’s sister recently went through a nasty divorce and her husband took a portion of the inheritance in the divorce. Is that possible?
-Taken Aback on Tayberry Dr.
Dear Taken Aback:
When a married spouse in California inherits, those funds are Separate Property. Unlike Community Property, Separate Property is not “split down the middle” in a divorce. Separate Property goes “off the top” back to its sole owner.
But property can be changed (or “transmuted”) from Separate Property to Community Property. If the inheriting spouse co-mingles, or mixes, new assets in the same account with the spouse, the Separate Property character can be jeopardized. The longer this mixing occurs, the greater the risk that it could be evenly split in a later divorce.
Commonly, beneficiaries don’t know their options or believe they will be married forever. They may deposit their inheritance in a joint account or buy a house and put the spouse on title.
There are pros and to keeping inheritances separate. It is critical for a beneficiary to understand his or her options and make an informed decision. When a client of mine inherits funds, we have a conversation about this topic.