4 Ways to Screw Up Your Inheritance in Divorce
Usually, I write these blog posts to explain how you can keep assets separate in divorce. Today, I thought I would do the opposite and tell you how to screw up your inheritance and turn your separate inherited property into marital property you have to split in divorce.
Before we get to the how-to, let’s talk about Utah’s general rule about inheritance in divorce. The general rule is this:inheritance is separate property. Easy, huh?
But, like everything, easy is, well, pretty easily srewupable. (Yes, I know screwupable isn’t a word, but you get the gist.)
Here are the top four ways you can screw up your inheritance and turn it in to marital property:
- Put your inheritance in a joint bank or investment account.
The moment you put your money in a joint account with your spouse, you have comingled money. And you have to assume that comingled money is marital money, because, for the most part, it is. There might be some exceptions to this (e.g., if you can trace back your inheritance money remaining in the bank account), but it’s not worth the risk.
- Buy property and put your spouse on the title or the mortgage.
If you buy property (land, home, etc.) and put your spouse on the title or the mortgage, a judge is very likely to see that as having become marital property. Don’t take the chance: keep your spouse off the paperwork.
- Spend marital income on property bought with inheritance money.
Say you buy a property with your inheritance. You put down $100,000 and mortgage the rest. You were smart and didn’t put your spouse on the property’s title or mortgage. So far, so good. Then, you started paying the mortgage with marital income. Not good.
Every time you pay the mortgage with marital income, your inherited property transmutes (unlike screwupable, transmute is a real word) into marital property. Not all of your property transmutes when you do this (probably), but it becomes more and more marital as time goes on, and that marital portion of the property will be split in divorce.
(Hint: if you don’t want property to transmute, buy only the property you can pay off with your inheritance.)
- Pay for family stuff with your inheritance.
If you start spending your inheritance on family vacations, furniture, and the like, there’s an argument the inheritance is marital property. Courts are pretty good about saying that the unspent portion of your inheritance is still separate property (assuming you didn’t do #1), but why take a chance?
