Is Inheritance Considered Separate Property in Divorce?

Key Takeaways:

• Washington is a community property state, which can affect how inheritance is treated in a divorce.
• Inheritance is usually considered separate from joint marital property and not up for division, but not always.
• Inheritance can lose its separate status if it commingles with marital assets, like if it’s used to pay a joint mortgage or community bills.
• Appreciation and sweat equity can create community interest if inherited property increases in value, especially if the spouse contributes to improvements or marital funds were used for maintenance and upgrades.
• In Washington, inheritance begins as separate property, not up for division during a divorce, but how it is handled determines whether it remains that way.
• It’s likely in your best interests to consult a financial professional or divorce lawyer to make sure you do everything possible to protect your inheritance.

The division of property is a major part of the process in most divorces. Splitting up assets has a significant impact on your finances in the future, so it makes sense to spend time and energy here. When preparing to dissolve a marriage, people often wonder how to deal with inheritance in divorce.

Is Inheritance Divided As Community Property?

Washington is a community property state. This means the courts view all assets earned or acquired during the marriage as belonging equally to both spouses.

This doesn’t mean that you divide everything down the middle in a divorce. The goal is to split assets in a way that allows both parties to emerge on relatively equal footing and to enjoy a lifestyle similar to the one they experienced during the marriage.

This happens to all property acquired during the marriage unless it can be categorized as separate property.

Some items do remain the sole possession of the spouse who acquired them. In most cases, inheritance falls into this category.

Washington State law defines separate property as:

“Property and pecuniary rights owned by a spouse before marriage and that acquired by him or her afterward by gift, bequest, devise, descent, or inheritance.”

The statute goes on to add that separate property, “shall not be subject to the debts or contracts of his or her spouse.”

This means that in most cases, inheritance remains with the inheritor.

When it comes to divorce, these funds and property aren’t subject to distribution since the courts generally view them as separate, non-community property.

So, odds are that, if you get an inheritance, you’ll maintain possession of it.

The same usually applies to any assets you acquire through inheritance. For example, if you use your inheritance to buy a boat, that’s typically classified as separate property. Or if you inherit a house and rent it out, the state considers any profits to be separate property.

We use terms like “typically” and “in most cases” because that’s usually how things go. But not in every case.

As with many elements of divorce, things often aren’t black and white. Just because that’s how situations often play out doesn’t mean that’s how they always go.

Related Reading: How Long Does Divorce Take in Washington?

What if You Comingle Community Funds and Inheritance?

Inheritance starts out as separate property, but it doesn’t always stay that way.

It’s possible for separate property such as inheritance to commingle with joint funds and become community property.

When this happens, it becomes eligible for division in a divorce under Washington’s community property laws.

This happens in several ways. For example:

• If you inherit a large sum of money and deposit it into a joint account.
• You use inherited money to pay community bills, like a mortgage or car payment.
• Inherited assets such as houses, cars, or real estate often lose their separate property status due to appreciation, especially if your spouse contributes to any increase in value.
• If you inherit a home and subsequently add your spouse’s name to the deed, that changes its status.

In a divorce, you must declare all assets, separate or joint. In cases like these, the court may examine whether an item has lost its separate character. If this happens, it becomes community property and thus is divisible.

Even if you take great pains to keep assets separate, the court may still divide them in a divorce in some circumstances.

A judge may award separate property of one spouse to another in a divorce settlement if it’s necessary to create a fair and balanced settlement.

It was once necessary to prove exceptional circumstances, though that’s no longer the case. And though not common, it does happen.

Because of this, it’s important to keep separate property like inheritance distinct from marital assets.

Related Reading: Sweat Equity and Divorce Settlements

How Does Sweat Equity Affect Inheritance?

Increases in the value of inherited property often get overlooked in these cases. If you receive a sum of money and invest it, or if someone bequeaths you a home and the property value grows, you must account for this.

Though these items may be considered separate property, since these gains happened during the marriage, the court often views them as joint assets. As such, they may be up for division.

There are ways to avoid this. Putting the money directly into a trust is one common strategy.

This, however, does not guarantee protection. Take steps to maintain clear, well-defined borders between the two.

If you recently received an inheritance or stand to receive significant assets, it may be worth your while to consult an attorney or financial expert. An experienced lawyer should be able to help you protect your assets.

If you don’t shield your inheritance properly, you may stand to lose a substantial amount in divorce.

Related Reading: How Does Washington Handle Debt In Divorce?