California’s community property laws often trigger serious financial worries in divorce. We’ve all heard horror stories of people losing “everything” at the end of a marriage, so if you have or expect to receive an inheritance, you may be concerned that your legacy will be put at risk in a divorce.
The best way to protect your inheritance is to work with an experienced divorce attorney who understands the most effective strategies for achieving your goals in property division and other critical issues. While it is not always easy to predict whether an inheritance will be at risk due to divorce, here are some guidelines to keep in mind.
Understanding Community Property in California
Many people have heard that California is a community property state and they assume that means everything is split 50/50 in a divorce. However, this is not strictly true.
The law generally provides for a 50/50 split of property that is considered “community property.” However, not everything in a marriage is community property. Each spouse has their own separate property. And some property may be considered partially separate and partially community because it has been commingled together.
So, if your inheritance is considered to be community property, it will generally be split, but if it is treated as your separate property, then you get to keep all of it. If it has become hybrid property that is part community and part separate, you may need to divide part of it.
Inheritances are Generally Treated as Separate Property
Classifying property as community, separate, or hybrid can be a very complex undertaking, which is one reason it is so critical to work with a knowledgeable attorney. On general principle, anything you earned while you were married is considered community property. The same holds true for any property you purchased with money you earned during the marriage.
However, property you receive as a gift or inheritance while you were married is usually considered to be your separate property and not community property. This rule balances some competing rights. Each spouse has a general right to an equal share of assets acquired during the marriage, but families also have the right to leave an inheritance to loved ones without losing half of the legacy in divorce.
If there is a bequest made specifically to both spouses or to the family, then that property would be community property. But a bequest or inheritance in the name of one spouse will initially be treated as that spouse’s separate property that they do not have to share in divorce. Over time, however, that separate property can change.
Certain Actions Can Turn Inherited Property into Community Property That Must Be Divided
While an inheritance may start out as separate property, if it is not carefully kept separate, it can be partially or completely transformed into community property in a variety of ways. For instance:
- Inherited funds may be placed in a joint account and commingled with community funds
- A spouse might add their earnings (community property) to an account started with the proceeds of the inheritance
- The spouse who inherits a vehicle or real estate might add the other spouse’s name to the title
- The non-inheriting spouse might spend considerable time making improvements to an inherited property
- Community funds might be invested in an inherited vehicle or real estate
- Inherited funds might be used to buy a home lived in by the family
To protect an inheritance as separate property, it is wise to execute a pre- or postnuptial agreement specifying that the inheritance will remain the property of the spouse who inherited it. It is also wise to keep inherited property apart from community property to the greatest degree possible.
If it is too late and the property has already been commingled, attorneys might use forensic accountants to trace the separate property so that the inheriting spouse can claim the greatest possible share of it in divorce.
Holstrom, Block & Parke, APLC Understands How to Protect Your Property in Divorce
If you can take preventative steps before receiving an inheritance, you give yourself the best opportunity to protect that inheritance. However, regardless of how the inherited property has been treated, the dedicated attorneys at Holstrom, Block & Parke, APLC can still use a variety of strategies to preserve the value of your inheritance in divorce.
Call us at 855-426-9111 or contact us online to schedule a confidential consultation to learn how our team can fight to protect your inheritance in Southern California.