what happens if you inherit money and later get a divorce?
if you expect to receive an inheritance, the best way to avoid losing part of it in a divorce is enter into a binding financial agreement.
What happens if you inherit money and later get a divorce? Do you keep the money or does your former spouse receive a share? The answer depends on your circumstances.
If you spend the inheritance on a house that is titled in both your name and your spouse’s, the court will include the house in the property pool and divide it with all your other property. The longer your marriage, the more likely it is that the judge will divide the property pool equally.
If you invest the inheritance in your own name, it will still become part of the property pool when you divorce, but the judge might be less inclined to view the inheritance as something that you contributed to the marriage. Since spousal contributions are a factor that a judge must consider when dividing the property pool, you might increase the odds that the judge will award the inheritance to you, without awarding property of equal value to your spouse, if you do not spend the inheritance on property that benefits the marriage.
If you have a long marriage and limited assets apart from the inheritance, the judge will be more inclined to give a significant share of the inheritance to your spouse. That is particularly true if your spouse would be in a difficult financial situation after the divorce without receiving some of the inheritance.
Even if the judge does not divide the inheritance evenly, the judge may award spousal maintenance to a former spouse who will have limited resources after a divorce. To pay maintenance, you may need to dip into the inheritance. For that reason, just keeping the inheritance in your own name is no guarantee that you will keep the inheritance after a divorce.
Binding Financial Agreements
The best option for a spouse who expects to inherit wealth and does not want to share it is to enter into a binding financial agreement. If that is done before marriage, the agreement is referred to as a prenuptial agreement, or a “prenup.” Your prenup can specify that any inheritance you receive will be returned to you in the event of a divorce. A lawyer can help you draft specific language that will cover various contingencies, including what will happen if you decide to spend the inheritance on a home or other property that will benefit the marriage.
A binding financial agreement can be made at any time, even during or after the marriage. If you inherit unexpected wealth during your marriage, you may be able to convince your spouse to sign a binding financial agreement that will shelter the inheritance in the event of a divorce. Keep in mind, however, that your bargaining power is usually stronger before marriage than during marriage.
Under most circumstances, a judge must follow the terms of a binding financial agreement even if the judge would not have done so in the absence of the agreement. Talk to a lawyer about the specific things you must do to assure that your agreement is binding.
Disclaimer : This article provides basic information only and is not a substitute for a professional or legal advice. It is prudent to obtain legal advice from a family lawyer.