Puja Sachdev | July 3, 2024 | Property Division
California is one of a few states that use community property rules during a divorce. Community property typically includes all income and assets acquired by either spouse during the marriage. Each spouse has a 50% ownership interest in community property. Therefore, community property is typically divided equally between the spouses during a divorce.
There are exceptions to the community property rules for debts and property in a divorce. For example, some gifts may remain separate property even though the spouse received the gift while they were married. Likewise, inheritance is generally exempt from California community property rules. However, inheritance could be subject to property division in some situations.
Why Is Inheritance Exempt From California Community Property?
In a divorce case, there are two types of property: separate property and marital property. Separate property is not subject to division during a divorce. Typically, inherited property is separate property owned by the spouse who received the inheritance.
The law recognizes the right of someone to leave property to a specific person to belong to that person. If divorce laws make an inheritance community property, the state takes away the decedent’s right to choose their heirs.
Can an Inheritance Become Community Property?
An inheritance left to a couple or the family would most likely be considered community property. Additionally, there are ways that a person can cause their inheritance to be subject to community property rules during a divorce.
Examples of ways your inheritance could become community property include:
- Commingling your inheritance with marital assets, such as adding earnings to a bank account with funds from your inheritance
- Adding your spouse’s name to the title of inherited assets
- A spouse uses their separate funds, or you use marital funds to improve, maintain, or invest in property you inherited
- Depositing inheritance funds into a joint account that you and your spouse use to make withdrawals and deposits
- Spending an inheritance to purchase community property, such as a family vacation home, vehicle, boat, etc.
You may argue that the commingled inheritance remains separate property. The general rules for community property in California Family Code §§760 – 761 are rebuttable presumptions. Property division is a complex issue in California divorce cases. Community property is not as straightforward as it might appear. Therefore, most people benefit from hiring a San Diego divorce lawyer with substantial experience handling contested community property cases.
If you can provide evidence that shows you and your spouse intended for the property to be characterized as separate, commingled inheritance could be exempt from property division. For example, a prenuptial agreement may provide that all inherited property remains separate property, regardless of how the property is treated after the spouse receives the inheritance.
However, proving the commingled property is a separate asset could be challenging. It is better to take steps to protect the separate nature of inheritance.
Tips for Maintaining Inherited Assets as Separate Property in California
If you receive an inheritance, you need to decide whether you want to maintain the separate status or share your inheritance with your spouse as a marital asset.
If you want to maintain your inheritance as separate property, the steps you should take include:
- Open a separate account in your name only to hold inheritance funds
- Keep all documents related to the inheritance showing it was given solely to you
- Avoid commingling inheritance by using separate property to maintain inherited assets
- Do not use inherited property to purchase family vehicles or homes
- Negotiate a postnuptial agreement to maintain inherited assets as separate property
- Do not use inherited money to pay off joint debts or debts on marital assets
Individuals who want to protect an inheritance from an heir’s spouse may have several options. For example, they could place the inheritance in a trust instead of leaving it to an heir in their will. However, you must be very careful how you word the trust agreement to protect the inheritance. Also, if the heir commingles income they receive from the trust, the funds would likely be subject to property division.
A San Diego Divorce Attorney Can Help Protect Your Inheritance
If you anticipate receiving an inheritance or you received an inheritance, consulting a San Diego divorce lawyer may be worthwhile. An attorney can offer other ways to protect inheritance from becoming community property in California.
Contact Our Family Law Firm in San Diego, CA
Contact our experienced San Diego family law lawyers at San Diego Divorce Lawyers, APC today for legal assistance. Contact our San Diego office at (619) 866-3756 to schedule a free consultation.
San Diego Divorce Lawyers, APC
2851 Camino del Rio S #430
San Diego, CA 92108
