No matter your reason for pursuing a divorce, the process is never easy. From dividing assets to determining custody, there is a lot at stake.
The complex process of property division can turn from a stressful task to a nightmare when an inheritance is added to the mix. If you are considering divorce and are expecting or have received an inheritance, it’s crucial that you speak with a knowledgeable attorney to help you protect your property.
Typically, income earned during a marriage is considered marital property. However, when dealing with an inheritance, this may not be the case. Inherited assets may be treated differently than other money that comes into a marriage.
How the inheritance is labeled will determine who is entitled to its value. When dividing property during a divorce, couples can categorize assets as either marital or separate property.
Property, assets, or debt that is jointly owned by a couple is considered marital property. According to Rhode Island law, most assets acquired throughout marriage will fall under this category and are subject to equitable distribution.
On the other hand, separate property is considered to belong to only one spouse and is not subject to division during a divorce. Inheritances can be regarded as separate property, provided that the property is kept separate.
However, what is done with an inheritance may come into question when determining its property status. For instance, a home inherited during the marriage may become ‘transmuted’ into joint property if both names are added to the deed.
Transmutation is a term used to describe property that has been transformed from a party’s separate property into marital property. In the above example, the inheriting spouse may have difficulty convincing a judge that the house was never intended to be marital property.
If an inheritance is found to be transmuted and considered marital property, it will be subject to equitable distribution. The court will consider factors such as who managed the inheritance and whether or not dividing an inheritance will make a divorce agreement more equal.
Another situation where inheritance can change from separate to marital property is through commingling. This occurs when inherited money is put into a joint bank account and used for marital expenses such as a mortgage or jointly owned car payments.
Several tactics can be used to show an inheritance should continue to be considered separate property. A well prepared pre- or post-marital agreement can outline and document the intention of inherited assets.
Due to the complexities of classifying an inheritance as marital or separate property, you’ll want a knowledgeable attorney on your side. Contact our firm today to discuss the specifics of your case.