Generally speaking, the assets that couples own fit into two categories. Separate assets are things that they own individually, which do not have to go through property division during the divorce. Marital assets, on the other hand, are things that they own jointly and do have to be divided.
But it’s not always clear which category a specific asset will fall into. For instance, an inheritance may be a marital asset, but it isn’t in all circumstances.
Who was it given to?
For one thing, you have to consider who received the inheritance. If it was given to the couple jointly, then they both probably own it and need to split it up. But if it was given to only one person directly by their own parents or extended family members, then it may start as a separate asset. This is true even if the couple was already married when the gift was given.
How was it used?
Even after the inheritance has been received, its status can change. For instance, if it was used to make joint purchases or pay joint bills, then it may change from a separate asset into a marital asset. This is known as commingling.
Commingling can also happen if the inheritance is stored with joint funds. If someone initially receives a check from their parents, that may be a separate asset. But if they cash that check and put the money in their joint investment portfolio, they have now mixed it together with marital funds. Odds are that the entire account will count as a marital asset, meaning that the inheritance gets divided with other investments.
This can get very complicated, and couples don’t always agree on how financial assets should be split up. It’s important for them to know what legal steps to take at this time.