Protecting Your Inheritance During a California Divorce

Going through a separation from your spouse can be emotionally challenging. The emotional toll can grow when you realize your finances may take a hit because of your deteriorating relationship. California follows community property laws, meaning both spouses jointly own property acquired during the marriage. When thinking about minimizing the damage, it can be wise to understand how to protect your inheritance during a California divorce.

What Is Community Property and Separate Property in California?

Understanding the difference between community and separate property can be essential to protecting assets like an inheritance.

Like many states, California claims assets, income, and debt gained during the marriage become owned by both spouses. This includes wages, salaries, bonuses, investments purchased with marital funds, homes purchased during the marriage, appreciation of asset value, and debts incurred. All of these elements are community property and must be divided during the divorce.

Separate property refers to assets, income, and debt belonging solely to one spouse. This property is not subject to division during a divorce and typically includes:

• Assets acquired before marriage. Any property you owned before you got married would fall under separate property unless you committed an act to transition it to community property. These assets can include cars, savings accounts, or even independently owned real estate.
• Gifts or inheritances. When someone receives a gift or inheritance to their name, these are separate property unless they are commingled. Mixing marital funds with inheritances can cause an issue later on. A cash gift from a parent or inherited stock portfolio can remain separate property if you are diligent.
• Assets excluded by a prenuptial agreement. Prenuptial agreements can specify certain assets that should remain separate property through marriage and after divorce. These agreements can include inheritances even if a spouse has not received theirs.

How Separate Property Classifications Can Protect Your Inheritance

In California, if you inherit money or assets before your marriage, they are your property if you keep them separate from marital funds. In this case, your spouse has no legal claim to your inheritance during a divorce because they never owned the property. Separate property classifications are essential here because processes like commingling can complicate situations.

Commingling’s Impact on Separate Property

Commingling refers to mixing separate property funds with marital funds. An example is depositing your inheritance into a joint bank account or using inherited funds to pay for marital expenses like a family car or an addition to a home. These purchases or events can blur ownership lines and complicate property division.

In these scenarios, the other spouse can argue that the inheritance contributed to the overall marital estate and that they are entitled to a portion of it during the divorce. Due to the life-changing impact of an inheritance, you need to protect your financial security and freedom. If you expect or are going through a divorce in California, you need to understand how to effectively navigate your situation.

Appropriate Documentation

Meticulous documentation of your inheritance and what happens after receiving it can be vital to its safekeeping. You should gather and organize critical documents like copies of the will or trust that granted you the funds or assets. Additionally, official statements or titles can show your ownership and when it started. With this information, you can establish a clear timeline to prove your inheritance should be excluded from community property.

The Advantage of a Separate Account

You should open a separate bank account if you are not married yet and have yet to do this. Depositing your inheritance funds into this account can keep them safe and help you avoid blending them with marital funds. Maintaining separate statements for this account can be crucial in solidifying your separate property claim.

Prenuptial Protections

One of the more popular and understood ways to protect an inheritance or other premarital assets is a prenuptial agreement. These arrangements help individuals differentiate what should and should not become marital property upon marriage’s commencement and what should be divided after a potential dissolution. When someone has or will receive an inheritance and chooses to draft a prenuptial agreement with their partner, they can safeguard their assets from becoming marital property.

In these agreements, people can lay out strict guidelines for what happens to their assets in a divorce. This can provide a helpful strategy just in case their circumstances go awry in the future.

FAQs

Q: Can My Spouse Claim Part of My Inheritance in California?

A: Your spouse can claim part of your inheritance in California under certain circumstances. While having a family law attorney can help you avoid unfortunate situations like this, your spouse can claim part of your inheritance if you combine your inheritance with marital funds or if your inheritance appreciates during the marriage. To protect your inheritance, you should keep clear documentation on where your inheritance is and how it changes over time.

Q: What Happens if My Inheritance Increases in Value During the Marriage in California?

A: If your inheritance increases in value during the marriage in California, the increase is community property. A significant increase in the value can result in an unexpected split in a future divorce. A family law attorney can help determine a fair division based on the original amount, your spouse’s contributions, and more. It is essential to have legal representation if you seek to protect your inherited assets.

Q: Can I Use My Inheritance to Pay Legal Fees in California?

A: You can use your inheritance to pay for legal fees in California if what you draw from your funds is separate property. Fees associated with divorce can create a significant financial burden, so having an inheritance to pull from can be a considerable advantage in the process. Using your inheritance to hire legal representation can ensure you have the resources to secure a fair outcome with your settlement.

Q: Can I Still Form a Prenuptial Agreement Even After Being Married for Years in California?

A: You cannot form a prenuptial agreement after being married for years in California, but you can form a postnuptial agreement. These devices, created after marriage, can function like a prenuptial agreement to protect assets like your inheritance or other separate property by designating what should happen to it after a divorce. To craft such a document, both spouses need full financial disclosure, and the agreement must be fair to each party. Consulting an attorney is wise in this case.

The Value of Legal Representation

Having a partner in your journey to protect your inheritance can be helpful. Our team has the experience necessary to keep your assets separate and guide you on making decisions that remove stress from a divorce instead of compounding it. Whether you anticipate a separation or have started the process, a family law attorney can be invaluable to your situation. Contact Bickford Blado & Botros today for help protecting your inheritance and other assets.

 

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