When you are happily married, you may decide to place inherited assets into joint names. When your marriage is over, will you regret doing so? Before you inherit, read this.
Your inheritance is your separate property whether you inherited the funds before, during or after your marriage. However, while there can be some exceptions, if you place the inherited money into joint names, this “comingling” likely converts your separate property into marital property.
Even if you do not place inherited assets in joint names, there may still be a marital component. In Pennsylvania, the appreciation, i.e. the growth, on your separate property during the marriage through the date of separation is a marital asset regardless of how the asset is titled. For example, if you inherit $100,000 and and when you separate that account is worth $125,000, $25,000 would be marital property. The original $100,000 remains your separate property.
Another aspect of inheritance to consider is that Pennsylvania is an equitable distribution state. This means that the assets are divided fairly, unlike in a community property state, where assets are divide equally. A factor that the court will consider in dividing the marital assets at equitable distribution is the size of a party’s separate estate. Therefore, even if you are able to preserve your inheritance as your separate property, your spouse could end up with more of the marital estate.
Another note about inheritance.
Did you know that in Pennsylvania you cannot disinherit your spouse without their permission?
Your spouse can sue your estate for a share even if you disinherited them in your Will. If this is not your intention, you should consider a prenuptial or postnuptial agreement with a spousal waiver.
Now that you know about divorce and inheritance in broad brush strokes, do you want to know the finer points and how they affect your circumstance? Get started here.