Whether you’ve already received an inheritance or expect one in the future, divorce can complicate how those assets are treated under California law.
California is a community property state, meaning any property acquired during a marriage is typically considered joint property. However, inheritances are treated differently. Inherited assets are usually classified as separate property, which isn’t automatically divided during divorce. That said, there are circumstances where separate property can become intertwined with community property, creating disputes over ownership.
How inheritance is handled during divorce depends on how the assets were managed during the marriage. If an inheritance was kept entirely separate, it’s likely to remain yours. But if it was commingled with marital property—such as being deposited into a joint bank account or used to pay for shared expenses—it may lose its separate status. The specifics of your case will determine the outcome.
Inheritances as Separate Property in California
California law categorizes inheritances as separate property, meaning they belong solely to the person who received them. However, this classification comes with some caveats.
If you keep an inheritance in your name, it will generally remain separate property. For instance, depositing the funds into a personal account that your spouse doesn’t access can help preserve their separate status.
Challenges arise when inherited assets are commingled with community property. Suppose you deposit inheritance funds into a joint account used for everyday expenses or invest them in a marital home. In that case, determining whether the inheritance remains separate can become complicated. Courts often require detailed financial records to trace the origin and use of these assets. Without clear documentation, a judge may decide that the funds are community property and subject to division.
Maintaining the separate nature of an inheritance requires careful management. Keeping detailed records, avoiding commingling, and consulting with an attorney can make a significant difference.
How Commingling Can Affect Your Inheritance
Commingling occurs when separate property, such as an inheritance, is mixed with community property. This process can blur the lines between what belongs to you and what is shared, potentially making your inheritance subject to division in a divorce.
Common ways inheritance funds are commingled include:
- Depositing funds into joint accounts - If you deposit inheritance money into a bank account you share with your spouse, it may lose its separate status.
- Paying for marital expenses - Using inheritance funds for household bills, vacations, or other joint costs can create confusion over ownership.
- Investing in shared property - If inheritance money is used to buy, renovate, or improve a home owned jointly, it could be considered community property.
- Lack of documentation - Failing to keep detailed records of how the inheritance was used makes it harder to prove it remained separate.
If you wish to protect your inheritance, consult with a financial advisor, keep the funds in a separate account, don’t use the funds for shared expenses, and document the use of the funds. These steps reduce the risk of commingling and help ensure the inheritance retains its separate status. Once commingled, it can be challenging to untangle its ownership, often requiring legal intervention and financial tracing.
Final Thoughts on Protecting Your Inheritance
Divorce in California doesn’t automatically mean you’ll lose your inheritance, but how you handle those assets during your marriage matters. Keeping inheritances separate, avoiding commingling, and maintaining thorough records are critical to protecting what is yours.
Navigating the intersection of inheritance and divorce can be complex. Consulting a knowledgeable divorce attorney can help you understand your rights and take proactive steps to safeguard your financial future.
We at Arnold Law Group, APC can help you with your divorce. Contact us today to learn more.