If you’re worried that you may lose part of an inheritance during divorce, you have good reason for concern. While an inheritance granted to you is supposed to belong solely to you, there are many situations where the inherited property can still end up going to the other spouse.
Here’s what Virginia law has to say on the subject.
Separate vs. Marital Property
When a couple divorces, generally they split up property that is jointly owned or marital property. If they cannot reach their own agreement about how to divide that property, the court will make a division not equally but equitably. If the judge believes it’s fair to give one party more property because of the other party’s bad behavior, for instance, the court may do so.
Property that one spouse owns on their own as “separate” property is not divided up. That spouse keeps it.
All property acquired during the marriage is generally marital property, even if it is wages earned solely by one party or an asset with only one party’s name on the title. A major exception to this rule is that property one spouse receives by bequest or inheritance is treated as the spouse’s separate property. Gifts are considered separate property, too, unless they come from the other spouse. So if a family member gave you something before they passed away, it should be considered your separate property. But it may not remain your separate property, and that is where the problem lies.
Separate Property Can Turn into Hybrid or Marital Property
The difficulties with separate property involve keeping it separate. It is very easy for separate property to turn into marital property, or a mixture of the two known as hybrid property. One way for the character of the property to change is for it to be commingled with marital property. If you receive money from your great aunt, for instance, and you put it in a joint bank account, it is commingled with marital property and can be hard to tell which is which.
Another way separate property can change is if it increases in value during the marriage, particularly if one of the partners in the marriage does something to increase the value. If you inherit real estate and make improvements or even maintain it, those efforts could cause the property to become partially marital property.
Keeping an Inheritance as Separate Property
The best way to protect an inheritance so that it is not subject to division in divorce is to execute a valid prenuptial agreement specifying that the property you have or may receive will remain your separate property.
It is also important to keep inherited property titled only in your name and to avoid doing anything on your own to increase the value. For instance, if you inherit stock, keep the accounts in your name and do not spend any of your time managing the portfolio. It is still possible that the increase in value could be treated as marital property, but it is less likely if you have not invested time and effort into it.