Only Marital Property is Subject to Division
We have discussed the mechanics of the property division phase of divorce at length in previous articles. As we have stressed, only property categorized as “marital property” is subject to division based on a fair and equitable allocation, separate property remains with the original owner. Because of this fact, a major part of the property division phase is preoccupied with categorizing specific assets as being either separate or marital property.
Inherited Property is Generally Categorized as Separate Property
There is a presumption that property acquired during marriage is marital property, but this presumption may be rebutted by citing an exception. If property is acquired during marriage, the burden rests on the party claiming separate property status to produce evidence to rebut the presumption. One exception (which can be cited) is property acquired via inheritance. Hence, even if a person inherits property as a beneficiary during a marriage, that property is considered separate property. Of course, this is the “default” or standard state of affairs, but inherited property can still be marital property in certain instances, such as when the parties privately identify property in a separate agreement. As a rule, however, inherited property is generally categorized as separate property.
Inherited Property Can Become “Joint” Property
Just because inherited property is generally categorized as separate property doesn’t mean that the characterization of inherited property can’t often be complicated. Property received via inheritance can sometimes acquire a “joint” status or character, meaning it may be considered a gift to the marriage if the ownership is not kept clearly separate. This may occur in different scenarios and for different reasons.
But if separate property is kept separately, then only the increase in value is considered marital. For example, a house is inherited early in the marriage, and titled separately, but it increases in value during the course of the marriage. That increase in value is marital property subject to division by the court. .
Another example would be inherited property which is “commingled” with marital property. If, for instance, a spouse inherits cash and then deposits the cash into a joint marital bank account, that inheritance becomes a presumed gift to the marriage..
Beneficiaries Should Maintain Adequate Documentation / Records
As mentioned, whenever a party claims that property presumed to be marital property is separate property, that party bears the burden of showing proof to substantiate the claims. Consistently, those involved in property-based disputes in a divorce should be sure to gather all relevant documentation whenever they attempt to make such claims. If a party is the beneficiary of a will, for example, that party should take steps to produce copies of the will in question, and any other evidence which might be helpful. In these situations, it’s not uncommon for parties to challenge the validity of the other party’s claims (with respect to property categorization), and so parties should always be thoroughly prepared when it comes to evidence.
Contact the Drake Law Firm for Additional Information
Readers who want to know more about inherited property, property characterization, or another related topic, contact one of the family law attorneys at the Drake Law Firm today by calling 720-797-6790.