When Does an Inheritance Become Marital Property?
Jan. 24, 2025
Divorce settlements often hinge on whether property is classified as marital or separate property. This classification is crucial because it directly impacts the division of assets during divorce proceedings. In inheritance cases, it’s not always clear whether the inheritance will remain the separate property of one spouse or become part of the marital estate.
While inheritance is generally viewed as separate property, there are instances where it can be transformed into marital property. The distribution of property during a divorce can be one of the most contentious aspects of the legal process. For married couples, the issue often centers on whether one person’s inheritance becomes marital property during divorce.
This question is important because inheritance is typically considered separate property, but circumstances can change, and it may become part of the marital estate under certain conditions.
If you are facing a divorce or have concerns about your inheritance, Attorney John R. Bailey is ready to help. His firm, The Law Offices of John R. Bailey, offers knowledgeable legal advice and representation to clients in Ypsilanti, Michigan, and the surrounding areas.
At The Law Offices of John R. Bailey, located in Ypsilanti, Michigan, the family law attorney guides individuals on how to protect their assets during a divorce. With over 30 years of experience, Attorney John R. Bailey understands the details involved in property division and can help clients make informed decisions about how their inheritance may be treated in a divorce.
Understanding Property Classification in Michigan
According to the State of Michigan, property division during a divorce is governed by the principle of equitable distribution. The state does not require assets to be divided equally but instead looks to divide the property in a manner that is fair to both parties. Whether property is considered marital or separate is the determining factor for this division.
Marital Property
Marital property is anything acquired during the marriage, regardless of which spouse’s name is on the title or account. This includes income earned during the marriage, property purchased with that income, and any jointly acquired assets. In Michigan, marital property is subject to division in a divorce.
Separate Property
Separate property refers to property acquired before the marriage, or property that was received as a gift or inheritance during the marriage. In most cases, separate property is not divided in a divorce and remains the property of the spouse who owns it. However, separate property can become marital property under certain conditions.
Equitable Distribution vs. Community Property
Unlike some states that follow community property laws, Michigan follows equitable distribution, meaning the court does not automatically divide marital property in half.
Instead, it considers a variety of factors, including the length of the marriage, the financial and non-financial contributions of each spouse, and the financial needs of the parties involved. This is where a family law attorney in Ypsilanti, Michigan, can help you.
How Inheritance May Become Marital Property
While inheritances are typically classified as separate property, certain actions and circumstances can cause an inheritance to be treated as marital property. Michigan courts will look at various factors to determine if an inheritance should remain separate or be considered part of the marital estate.
Commingling of Inheritance with Marital Assets
One of the most common ways inheritance becomes marital property is through commingling. This occurs when an individual combines their separate inheritance with marital assets, such as depositing inherited funds into a joint bank account or using them to purchase joint property.
When assets are commingled, it becomes difficult to distinguish between marital and separate property, which can lead to an inheritance being treated as part of the marital estate.
Example: A spouse receives an inheritance of $50,000 and deposits it into a joint account that both spouses use. If this money is used to pay for household expenses or if it is used to make joint purchases, the court may rule that the inheritance is no longer separate property.
Legal implications: The court may decide that because the inheritance was mixed with marital funds, it has lost its status as separate property and must be divided as part of the marital estate.
Transferring Inheritance Into Joint Ownership
Another situation where inheritance could become marital property is when it is transferred into joint ownership. This could occur if the inheriting spouse uses their inheritance to purchase property that both spouses use, such as a home or vehicle.
Example: If a spouse inherits a property and then adds their spouse’s name to the title or deed, this could be seen as a gift to the other spouse, thereby converting the property into marital property.
Legal implications: In this case, the court may find that the inherited property was meant to be shared between the spouses, making it subject to division during divorce.
Using Inheritance to Fund Marital Expenses or Joint Purchases
When an inheritance is used for family expenses or joint purchases, it may become marital property. If the inherited money is used to support the family, purchase a family home, or cover living costs, the court may view it as a contribution to the marital estate.
Example: A spouse receives an inheritance and uses the funds to pay off the mortgage or purchase a new car that both spouses drive. The court may argue that the inheritance was used to benefit the marriage, thereby making it part of the marital estate.
Legal implications: In this situation, the court may rule that the inheritance has been used to enhance the marital estate and, therefore, should be considered marital property.
Prenuptial or Postnuptial Agreements
To prevent an inheritance from becoming marital property, spouses can create prenuptial or postnuptial agreements. These agreements can specify that any inheritance received by either spouse will remain separate property, even in the event of a divorce.
Example: Before or during marriage, a couple agrees in writing that any inheritance received by either party will remain their separate property and will not be divided during divorce.
Legal implications: A well-drafted prenuptial or postnuptial agreement can provide clarity and protection for inherited assets, ensuring they are not considered marital property.
Contributions by the Non-Inheriting Spouse
In some cases, the non-inheriting spouse may contribute to the upkeep, maintenance, or improvement of the inherited property. This could include performing renovations or making significant repairs to an inherited home.
Example: A spouse inherits a home, but their spouse contributes financially to the renovation or repairs. In this situation, the court may find that the non-inheriting spouse has a marital interest in the property.
Legal implications: If the non-inheriting spouse has made significant contributions to the property, the court may award them a share of the value of the property, even if it was inherited.
Additional Considerations for Protecting Your Inheritance
While Michigan law provides some guidance on property division, there are several other ways you can be sure your inheritance remains protected from becoming marital property. Here are some additional strategies to consider:
Creating a Trust
One of the most effective ways to protect an inheritance is by placing it in a trust. A trust keeps inherited assets separate from marital property and can safeguard the inheritance against potential division in a divorce.
How it works: A trust is a legal arrangement that places property under the control of a trustee, who manages the assets according to the terms set by the grantor. By placing inherited assets into a trust, you can prevent those assets from being treated as marital property in a divorce.
Clearly Documenting Inherited Assets
It is crucial to keep clear documentation of all inherited assets. This includes keeping records of the inheritance itself, how it was received, and how it has been used. This documentation can provide evidence in the event of a divorce, demonstrating that the asset was received as separate property.
Tip: Store important documents, such as the will or inheritance agreement, alongside any records of how the inheritance was handled, such as bank statements showing deposits into a separate account.
Avoid Joint Investments or Purchases
Another way to maintain the separate status of inherited property is by avoiding joint investments or purchases. For instance, if you inherit a sum of money, consider using it solely for your personal benefit rather than purchasing property or assets that would be shared with your spouse.
Tip: If you do decide to use inherited funds for a purchase, such as a vehicle or home, make sure it is titled solely in your name and avoid putting both spouses on the deed or title.
What Happens When There Is Disagreement Over Inheritance?
Even with precautions in place, disputes may still arise over whether an inheritance should be classified as marital property. A family law attorney in Ypsilanti, Michigan, can help mediate a disagreement. In these cases, the court will consider several factors when making a decision.
Intention of the spouse: The court will examine whether the spouse intended for the inheritance to remain separate or if they treated it as joint property. For example, if the inheritance was used for family expenses, the court may conclude that the intention was to benefit the marriage.
Commingling of property: If the inheritance was mixed with marital property, the court will look at how much of the inherited asset remains separate and how much has been combined with marital assets.
Written agreements: Prenuptial or postnuptial agreements that outline how inheritance should be treated during a divorce can significantly impact the court’s decision. These agreements offer a clear framework for how assets should be divided.
Contributions by both spouses: The court will also consider any contributions made by the non-inheriting spouse, especially if those contributions enhanced the value of the inherited property.
The Role of a Family Law Attorney in Ypsilanti, Michigan
An experienced family law attorney in Ypsilanti, Michigan, can provide valuable assistance in situations where inheritance and marital property are at issue. Attorney John R. Bailey has over 30 years of experience handling divorce cases and property division.
He understands the nuances of Michigan’s divorce laws and can help clients protect their inheritance from being classified as marital property.
Personalized legal advice: Attorney Bailey works closely with clients to understand their unique circumstances and develop strategies that best protect their assets. He takes the time to review all relevant financial information and create a tailored legal approach based on each client’s specific needs.
Experienced guidance: With his vast knowledge of family law, Attorney Bailey helps inform clients of the potential risks and legal challenges they may face. He works diligently to safeguard his clients' interests and advises them on the most effective ways to handle inherited property during divorce proceedings.
Whether through asset protection strategies or clear legal documentation, an attorney is one of the most necessary pieces to your case. Without an attorney, it can be increasingly difficult to handle the legal system. Fortunately, Attorney Bailey provides a reliable and trusted approach to managing these complicated matters.
Key Takeaways on Inheritance and Marital Property
Inheritance is generally considered separate property under Michigan law.
Commingling inherited property with marital assets can cause it to become marital property.
Using inherited property for joint expenses or purchases can lead to it being classified as marital property.
A prenuptial or postnuptial agreement can help define how inheritance will be treated during divorce.
If disputes arise, the court will examine the facts, including how the inheritance was handled, to determine whether it is marital or separate property.
Contact The Law Offices of John R. Bailey
Understanding inheritance and marital property can be challenging, but with the right guidance, you can handle these issues with confidence. The firm serves clients in Ypsilanti, Michigan; Washtenaw County; and the surrounding areas. Reach out today to get the legal help you deserve.
Contact a family law attorney John R. Bailey today for a consultation to discuss your case and secure the legal support you need.