California is a community property state that considers any property acquired during a marriage to be marital property. Does this mean that if a family member leaves you an inheritance during your marriage that it becomes marital property? What happens to your inheritance if you and your spouse divorce? At Holstrom Divorce Authority, we can help you understand inheritance and divorce in California and how the law applies to your situation.
Is an Inheritance Separate Property or Marital Property?
California makes property division during a divorce fairly simple. Any property acquired before the marriage is separate property and belongs to the sole spouse. Property acquired during the marriage is community property belonging equally to both spouses.
There are two exceptions to this rule: inherited assets and transmuted assets. If a family member gives you a gift or inheritance, those assets are yours as separate property, whether your inheritance includes cash, stocks, bonds, real estate, or other assets.
An issue of ownership arises if you commingle or transmute your inheritance assets. Commingling could include putting inheritance assets into a joint account, using marital assets to purchase a family home, or investing in stocks, real estate, or a business that you share ownership of with your spouse.
Transmutation is a legal agreement to convert some or all of your inheritance into marital funds. Once you transmute any portion of your separate property, you can’t revoke the agreement and withdraw that property from the marital assets.
Protecting Your Inheritance with a Prenuptial Agreement
If a family member leaves you an inheritance before you are married, you and your spouse can determine in a prenuptial agreement whether any investments procured with your inheritance money will become marital property. You and your soon-to-be spouse can also determine if you agree to share profits from an investment if your spouse helps you manage the investment, and what portion of the investment belongs to your spouse.
If you and your spouse are already married when you inherit money, you can outline similar decisions in a postnuptial agreement. A postnuptial agreement is the same as a prenup, but you and your spouse agree to a postnup’s terms during the marriage. Managing inheritance and divorce in California often requires multiple steps to keep your inheritance separate from marital assets.
Other Ways to Protect an Inheritance in a California Divorce
You have several options to protect your inheritance from a divorce at different stages of your marriage. Before your marriage begins, you have the option to create a prenuptial agreement. You can also avoid commingling assets by creating a separate account or a trust to store your inheritance.
During the marriage, you cannot commingle or transmute funds from your inheritance. Don’t use your separate assets to pay communal debts or to invest in community property. You can set up a separate account or trust and draw up a postnuptial agreement.
Contact an Experienced Divorce Attorney in Southern California
Inheritance and divorce in California are simple concepts if managed correctly. If you’re considering a divorce and inherited property, contact an experienced divorce attorney in Southern California. Call Holstrom Divorce Authority at (844) 237-5791 today.