Divorce can be a complex and emotional journey, especially when it comes to dividing assets between spouses. It’s common for divorcing spouses to battle over assets like money, homes, vehicles, furniture, vacation property, and heirlooms, but what happens when one or more of those assets was inherited from a family member?
Inherited assets are treated differently in divorce than other types of assets, and it’s important to know the law if you want to protect them from your spouse upon the dissolution of your marriage. If you’re facing this situation in Tennessee, understanding the distinction between marital and separate property is vital for determining the fate of your inheritance.
Understanding Marital vs. Separate Property
In Tennessee, assets and debts acquired during a marriage are considered marital property and are subject to equitable distribution upon divorce. This means that such property should be divided fairly, though not necessarily equally, between the spouses. Marital property includes things like homes purchased during the marriage, vehicles, and even retirement accounts contributed to during the marriage period.
Separate property, however, refers to assets belonging to one spouse. This category includes anything owned before the marriage, gifts received individually, and inheritances. As a rule, separate property is generally not divided in a divorce. However, the lines can blur, and separate property can transform into marital property under certain conditions.
How Inheritance Remains Separate Property
In Tennessee, an inheritance is initially considered separate property, whether received before or during a marriage. This means it belongs solely to the spouse who received it and is not subject to division during a divorce. However, this can change based on how the inheritance is handled during the marriage.
How Inheritance Can Become Marital Property
While inheritances are typically viewed as separate from marital property, specific actions can change their status, making them part of the marital assets.
This can happen in two main ways:
- Commingling: If you deposit inherited money into a joint account or use it for common marital expenses, it may be considered commingled with marital assets. Once commingled, it can be challenging to argue that the money remains separate and may be treated as marital property subject to division.
- Transmutation: This legal concept applies when the character of the property changes from separate to marital through an explicit agreement or by how it is used during the marriage. For instance, if you inherit funds and then use those funds to buy a home titled in both spouses’ names, this can be seen as an intent to make the inheritance a marital asset.
What Are Examples of Inheritance that Can Become Commingled?
Commingling inheritance with marital assets can change its classification from separate to marital property, making it divisible upon divorce.
Here are some common types of inheritances that might become commingled and end up being treated as marital property:
- Cash: If a spouse receives a cash inheritance and deposits it into a joint bank account used by both spouses for common expenses, this can commingle the funds. The court may then consider the cash as marital property because it has been integrated into the couple’s joint financial life.
- Real Estate: If inherited real estate is used as a family home or if both spouses contribute to its mortgage, taxes, or maintenance from joint funds, it may become marital property. Similarly, if the title of the inherited property is transferred to include both spouses, it signifies an intention to make the property a joint asset.
- Investment Accounts: If inherited stocks, bonds, or other investment accounts are transferred into joint accounts or if dividends from these investments are deposited into joint accounts, these assets might be viewed as marital property.
- Personal Property: Items such as jewelry, art, or other valuable personal property can become commingled if they are used jointly by the spouses or if they are gifted to the other spouse, effectively changing their nature from separate to marital property.
- Business Interests: Inherited business interests can become marital property if the non-inheriting spouse contributes labor or managerial skills to the business, or if marital funds are used to support or expand the business.
How Can You Prevent an Inheritance from Becoming Martial Property?
To prevent inheritance from becoming marital property, it’s important to keep it separate from joint assets and maintain clear records showing the separation. If you are dealing with inheritance issues in a divorce, consulting with a family law attorney is advisable to protect your interests and ensure proper handling according to Tennessee law.
Get Experienced Help from Our Knoxville Family Law Attorneys
Understanding how inheritance is treated in a Tennessee divorce is essential for protecting your assets. By being aware of the legal distinctions between separate and marital property and taking proactive steps to manage your inheritance correctly, you can ensure that your financial legacy remains intact even in divorce.
If you are going through a divorce and have an inheritance you wish to protect, it’s important to work with an experienced Knoxville family law attorney. Contact us today for a consultation to learn how we can help.
