Written by Jonathan Breeden
Divorce leads to a lot of questions about money, property, and debt.
You and your spouse have to figure out who keeps what, from the couch to flatware. You have to decide how much in your checking, savings, retirement, and investment accounts belongs to each of you. It can become contentious if one spouse wants to split the money or property the other believes is theirs alone, which happens a lot with an inheritance.
You should talk with an experienced NC divorce attorney at Breeden Law Office about what happens to an inheritance in a divorce. In some cases, the gift is one person’s property, and they keep it. In others, the court divides it. You can reach out online or call (919) 661-4970 to schedule an appointment.
In a divorce, the court determines whether each asset and debt are marital property or separate. The types of property are defined in North Carolina General Statute (NCGS) 50-20.
Marital property is any real or personal property acquired by either person between the date of the marriage and date of separation. Separate property is all real and personal property obtained before the marriage OR acquired by a spouse by devise, descent, or gift during the marriage.
If you or your spouse inherited money, real estate, or other items, these are assets acquired through devise or descent. They’re separate property and not divided in the divorce. The spouse who received the inheritance keeps it all.
Although an inheritance is generally separate property, it can become marital property. If the judge finds money, real estate, or personal property became part of the marital estate, then it will split those items during the divorce.
Ways in which an inheritance can become marital property include:
If you inherited a sum of money and then placed it in a joint checking or savings account that both you and your spouse used, then the court would consider it marital property.
Another example of transitioning an inheritance to marital property is if you add your spouse’s name to the title of a piece of inherited real estate or give your spouse an ownership interest in some other way.
If you used inherited funds to pay off your house, buy a new home or vacation house, buy new vehicles, or make some other large purchase to benefit the family, then the court considers this a gift to the marriage.
If the conveyance specifically named both you and your spouse, then the gift is jointly owned property.
You and your spouse might have negotiated a prenup that referenced past or future inheritances. The prenup can specify that any bequest or gift from family remains separate property or becomes marital property.
During the divorce, the judge will look at the facts to decide whether the inheritance is separate or marital property. These facts include when you received the property, who was named in the will, whether the inheritance was ever in a joint account, and whether you used it to buy shared property. The judge also will review any relevant provisions in a prenuptial agreement.
Two things can happen:
North Carolina law requires a judge to make an equitable distribution of the marital estate. Equitable means what’s fair. It doesn’t mean the court divides everything in half.
The judge considers many elements, including what each spouse contributed to the marriage, each spouse’s earning potential, and more. This means an inheritance might not be divided evenly.
Separate vs. marital property matters when you ask the judge to divide the property. But many couples choose to negotiate the property distribution themselves.
You and your spouse can decide whether to count the inheritance as one person’s property or shared. If it’s joint property, then you can calculate how to divide it along with the rest of your assets and debts.
If you want to protect an inheritance or believe you should receive part of your spouse’s inheritance, talk with Jonathan Breeden as soon as possible. Jonathan has years of experience guiding North Carolina residents through divorce and helping them tackle tough financial questions.