California is one of only a handful of states that strictly adheres to community property laws, which deem that everything acquired during the course of a marriage is community – or marital – property. This means that all such property belongs equally to both spouses. Even hard-line community-property states like California, however, draw a line when it comes to a personal inheritance – even those received while you are married.
When couples divorce, one of the most difficult steps frequently deals with how to divide marital assets. In order to figure out how to divide assets, you first have to properly identify which assets have to be allocated, which might include an inheritance.
When a family member passes away, their property and assets are typically transferred over to other family members. In many cases, the deceased has already executed a will to describe how to divide their property when they die. If you are listed on the will to receive their property, it's commonly known as an inheritance.
It should be noted you can still receive an inheritance if a family member died without a will. In California, some family members are automatically awarded property from a family member's estate after they die. As you might guess, spouses and children are at the top of the list inherit property.
California recognizes a category of separate property, which means it's retained by the individual spouse in a divorce. We often receive questions about an inheritance, such as is it considered community or separate property?
If I get a divorce, do I have to split it equally with my spouse? In most divorce cases, you will be allowed to keep your inheritance. If you have concerns about your entitlement to your inheritance in a divorce, you need the experienced legal counsel of a divorce and family law attorney. Our California divorce lawyers provide an overview below dealing with inheritance in a divorce.
Inheritance is Separate Property in California
In the State of California, the distinction between community property and separate property is fairly well delineated. Inheritances, unless extenuating circumstances apply, are considered the separate property of the beneficiary.
As such, you generally won't be required to share an inheritance with your divorcing spouse. Unless you do something to alter your inheritance's separate nature, including the commingling or transmutation of funds, the court's presumption is that your inheritance belongs to you alone.
Commingling of Your Inheritance
The most common means of tainting your inheritance is to commingle it with your marital assets. When you use your inheritance as if it is marital property – by siphoning it through you and your spouse's joint accounts – it makes it hard for the court to decide whom the asset belongs to. As such, the court can employ the fallback assumption that your inheritance is community property.
If, on the other hand, you deposit your inheritance in an account that is in your name only and that you diligently refrain from commingling with your marital assets, your inheritance will remain your separate property – safe from equal distribution in your divorce.
At this juncture, it's important to point out that something as innocent as depositing a paycheck into the inheritance account can amount to commingling. This is because, in the State of California, your paycheck is community property.
Transmutation of Your Inheritance
Another potential mechanism for tainting your inheritance is via transmutation. Transmutation amounts to an act on your part that tends to indicate your intention to alter the nature of your inheritance from your own separate property to marital property.
For instance, if you inherit property that you transfer into both you and your spouse's names, you've officially transmuted the property. Basically, this means that you've indicated to the court that your intention was to gift your inheritance to your marriage. Additionally, if you use a portion of your inheritance as a down payment on your family home or to pay for your family home, it transmutes that specific amount of your inheritance.
Commingling or Transmutation of Your Inheritance and the Burden of Proof
If your spouse makes the claim that you either commingled or transmuted your inheritance in the course of your marriage, the burden of proof lies with you. In other words, you are obligated to convince the court that your inheritance should remain your separate property.
If you can identify every instance in which you commingled funds – from the time you received the inheritance to the present – the court may use its considerable discretion to identify the remaining balance as separate property that belongs to you alone. You may, however, need professional forensic accounting services to convince the court.
Your financial deeds, as they relate to the transmutation of your inheritance, on the other hand, are probably more easily rectified. As long as you never signed a document indicating your intention to gift your inheritance to your spouse or your marriage, the court is likely to rule in your favor.
Your Unique California Divorce Situation
The fact is that every divorce is utterly unique to its own set of circumstances, and as such, your inheritance will likely play a pivotal role within this set of circumstances. While inheritances are generally considered to be separate property, many marriages are complicated by personal circumstances.
In other words, if you receive an inheritance before you've even begun to contemplate divorce, you may not recognize the ramifications of commingling or transmutation of said funds.
Consult with an Experienced Los Angeles Divorce Lawyer
If you're concerned about your spouse's entitlement to your inheritance in California divorce, consult with an experienced Los Angeles divorce lawyer. It's in your best interest to always keep detailed records about an inheritance you may receive. In some cases, your spouse might attempt to claim ownership interest in these assets if you decide to get a divorce.
It's possible to protect your inheritance if you can show the family law court judge these assets were given to you alone – and there was never an intent to transfer ownership rights to your spouse. Inheritances often complicate a divorce, but our dedicated Los Angeles divorce and family law attorneys are here to help protect your rights and your assets. To schedule a free consultation, contact or call us at 818-528-3471.
Furman & Zavatsky
15821 Ventura Blvd #690
Encino, CA 91436