Property division can become more complicated when one spouse received an inheritance before or during the marriage. Money, real estate, investments, family heirlooms, and other inherited property may raise questions about what belongs to the marital estate and what can remain separate.
Under Tennessee law, an inheritance received by one spouse generally begins as separate property rather than marital property. However, how the inheritance is managed during the marriage can affect its classification. Understanding the difference between marital and separate property—and how issues such as commingling and transmutation can arise—is important when an inheritance is involved in a Tennessee divorce.
Understanding Marital vs. Separate Property
In Tennessee, courts first classify property as marital or separate before dividing the marital estate. Property acquired during the marriage is generally considered marital property unless an exception applies. Marital property can include real estate, vehicles, investment assets, and portions of retirement benefits accrued during the marriage. The court then divides marital property equitably, which does not necessarily mean equally.
Separate property generally includes property owned before the marriage, certain individually received gifts, and property received through inheritance. Separate property ordinarily is not divided as part of the marital estate. However, its classification can change in some circumstances, including through commingling or transmutation during the marriage.
How Inheritance Remains Separate Property
In Tennessee, property received by one spouse through inheritance generally begins as separate property, whether the inheritance is received before or during the marriage. As long as it retains its separate-property status, it ordinarily is not included in the marital estate divided during divorce. However, how the inheritance is titled, used, or combined with other property during the marriage can affect its classification.
How Inheritance Can Become Marital Property
Although an inheritance generally begins as separate property in Tennessee, how it is handled during the marriage can sometimes affect its classification.
Two important concepts are:
- Commingling: Commingling can occur when inherited property becomes mixed with marital property to the point that the separate portion can no longer be clearly identified or traced. For example, depositing inherited funds into a joint account and repeatedly using that account for marital income and expenses can make classification more complicated. However, if the inherited funds remain segregated or can still be adequately traced, they may retain their separate-property status.
- Transmutation: Transmutation can occur when separate property is treated in a way that indicates an intention for it to become marital property. For example, using inherited funds to purchase a home titled jointly in both spouses’ names may be evidence that the property was intended to become part of the marital estate. Courts consider the circumstances and conduct of the spouses when determining whether transmutation occurred.
What Are Examples of Inheritance that Can Become Commingled?
Inherited property can sometimes lose its separate-property status through commingling or transmutation. Whether that occurs depends on how the property is titled, used, mixed with marital assets, and whether its separate source can still be traced.
Common examples include:
- Cash: Depositing inherited money into a joint account that also receives marital income and is regularly used for household expenses can make the inherited funds more difficult to identify as separate property. If the inherited portion can still be adequately traced, however, it may retain its separate-property status.
- Real Estate: Inherited real estate may raise transmutation issues if it is used as the marital residence, maintained or improved through joint efforts or marital funds, or retitled in both spouses’ names. These circumstances may be evidence that the property was intended to become part of the marital estate, but the court considers the overall facts of the case.
- Investment Accounts: Inherited stocks, bonds, or investment funds can become more difficult to classify when they are moved into jointly owned accounts or repeatedly mixed with marital funds. Maintaining records showing the original inheritance and subsequent transactions can be important when determining whether the separate portion can still be traced.
- Personal Property: Inherited jewelry, artwork, collectibles, or other valuable property may raise classification issues if the inheriting spouse gives the property to the other spouse, sells it and mixes the proceeds with marital funds, or otherwise treats the property in a way that indicates an intention for it to become marital.
- Business Interests: An inherited ownership interest in a business may remain separate property. However, income from the business or an increase in its value during the marriage may be considered marital property if both spouses substantially contributed to its preservation or appreciation. Contributions can include direct work in the business as well as certain indirect contributions recognized under Tennessee law.
How Can You Prevent an Inheritance from Becoming Martial Property?
To help preserve an inheritance’s separate-property status, keep inherited assets separate from jointly owned property when possible and maintain clear records showing where the inheritance came from and how it was handled. Avoiding unnecessary commingling or joint ownership can also make it easier to trace the inherited property if its classification later becomes disputed.
If inheritance is an issue in your divorce, a Tennessee family law attorney can review how the property was received, titled, and used during the marriage and explain how those circumstances may affect whether it remains separate property.
Get Experienced Help from Our Knoxville Family Law Attorneys
Understanding how inheritance is treated in a Tennessee divorce is essential for protecting your assets. Keeping inherited property separate, maintaining clear financial records, and understanding how commingling or transmutation may affect its classification can help preserve a claim that the inheritance should remain separate property.
If an inheritance is an issue in your divorce, an experienced Knoxville family law attorney can review how the property was received, titled, and used during the marriage and explain how Tennessee law may apply to your circumstances. Contact us today for a consultation to learn how we can help.
