Aug 24, 2022
Can I keep My Inheritance in my Divorce?
It depends. The 1980 revision of the Pennsylvania Divorce Code created equitable distribution. Equitable distribution means that all assets and liabilities acquired during a marriage are joint marital property. This is true regardless of whose name is on the asset or liability.
Inheritance is one of the exceptions to that rule. Under the equitable distribution guidelines, how the inheritance is treated matters when it comes to divorce. The general rule is that whoever receives the inheritance while married is the sole and separate owner. Unless the inheritance becomes joint marital property.
Debbie Y. Schneider, Esq., an Attorney at Alpha Center for Divorce Mediation discusses the rules on inheritance when it comes to divorce.
How does an inheritance become joint property?
Any action by the person receiving the inheritance changes the nature of the asset. For example, one spouse may say to the other, “we will use this money to take the whole family to Disneyland next summer and we will put a new deck on the house.” Those words and actions change the nature of the asset. It now becomes joint marital property subject to equitable distribution.
Comingling the inheritance, such as a in joint checking account, or investment account, or even speaking of the funds as being a joint asset-makes it a joint asset.
What are the considerations in making inheritance a joint asset?
Not being aware of the nuances of the Divorce Code leaves many couples dismayed and shocked when they decide to divorce.
Some Courts have recognized the that the outcome can be so unfair to the spouse who received the inheritance that they are utilizing a “vanishing credit” principle that allows the receiving spouse to keep some of the inheritance over time, even if their actions have converted the separate asset into a marital asset. However, this is not universal in all jurisdictions and is not currently a part of the Divorce Code.
My advice to anyone expecting to receive an inheritance is to keep it completely separate. Do not let any of your words or actions convert that separate asset into a marital asset. You can still share the asset with your spouse and family, but in the event of a divorce, you are protected.
Alpha Center for Divorce Mediation