When A Spouse Inherits Money Is It A Marital Asset?

An article posted last month in Forbes explores the case of a woman who recently came into a substantial inheritance from her grandfather. Not long after he passed away and left the money to his granddaughter, she and her husband began inheritanceexperiencing marital problems that ultimately resulted in divorce proceedings. The woman is now, obviously, highly concerned that she could be forced to give up a large share of inherited money to her husband.

When a spouse inherits money is it considered a marital asset and could this happen in Tennessee? Though the case in Forbes is certainly eye-opening, if handled properly, there should be no reason for the woman to fear giving up any of her inherited money to her husband. However, unwise handling of a monetary inheritance, like commingling the inherited funds with joint marital account(s), can pose a risk of the money not being exclusively retained by the spouse who inherited it if the couple enters into divorce proceedings.

When is inheritance separate property?

Inheritance is generally considered to be separate (non-marital) property in Tennessee. This means that when a person receives an inheritance during the course of a marriage, that money is assumed to remain the personal property of the recipient unless other actions are taken which transform it into a marital asset.

When is inheritance marital property?

Separate inherited property can become a marital asset under these two scenarios:

  • The first and most common situation is when the inherited asset is commingled with other marital assets. Once it is commingled, it is difficult, if not impossible, to distinguish the two different types of assets from each other.
  • The second situation in which a non-marital inheritance can become a marital asset is through transmutation. This, in effect, can occur when the parties treat the otherwise non-marital asset as if it is marital.

A good example of an inheritance remaining an inheritance is when one receives the money, then he or she places the funds into a bank account in his or her name only and leaves the money there instead of using it for marital expenses. No matter what the other spouse claims, this money should clearly remain the separate, non-marital property of the spouse who inherited it.

To prevent your inheritance from becoming marital property, you should seek the services of attorney Donna Wagner — especially if it’s a large sum of money. Mrs. Wagner can advise you on a strategy of not commingling your money as well as not using the money to pay the mortgage on your home, or for home repairs or renovations.

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