Episode 80 of the Divorce and Your Money Show discusses How to Protect Your Inheritance and Gifts during Divorce.
If you are in the midst of a divorce proceeding, you want to protect gifts and inheritances from your spouse. Therefore, it is important to understand the difference between Separate Property and Marital Property. Separate Property is solely owned by you, while Marital Property is generally acquired during the marriage.
While each state has different laws, there are several ways to make sure your inheritances and gifts are your separate property:
Keep inheritances and gifts in your name only.
Do not let spouses make contributions towards any gift received. Perhaps you received a house in your name only from your parents, but your spouse contributed to a renovation. If so, they can claim some of the house’s value.
You can transfer the inheritance or gift into a trust. Seek a qualified estate planner to help protect your assets using trusts.
If divorce is eminent, determine the right time to tell your spouse about any planned inheritances. You must eventually disclose it in the Financial Disclosure document, but they may not have entitlements to it.
Keep good records about where the inheritance came from, including any appreciation and modifications. Some states assume all property is marital, unless you keep appropriate records that prove it is separate (and has never been comingled).