When Does an Inheritance Become Joint Property with My Spouse?
Receiving an inheritance can be a blessing but can also create complications when you’re married. Under South Carolina law, inheritances are considered separate property belonging only to the recipient spouse.
However, there are situations where your inheritance could get mixed into the marital estate and become joint property with your spouse.
We’ve seen how inheritances can become a complex issue for married couples. In this article, we’ll walk through how inheritances work in South Carolina, when they may be considered marital property, and steps you can take to protect your inheritance.
Inheritances are Typically Separate Property in South Carolina
In South Carolina and most other states, inheritances received by one spouse during the marriage are considered separate, individual property. This means the inheritance belongs solely to the recipient spouse and is not subject to equitable division if the couple divorces.
For example, if Wendy inherits $100,000 from her late father while married to John, those funds are deemed Wendy’s separate property. If Wendy and John later divorce, John has no claim to the inherited money even though Wendy received it during their marriage.
The logic behind this is that an inheritance is not earned by or given to the marital unit. It comes to one spouse through a gift or descent from a third party. So, it would be unfair to treat it as joint property when dividing assets in divorce.
Exceptions: When an Inheritance Can Transform into Marital Property
While inheritances generally remain separate, South Carolina law does recognize some exceptions where they may be considered marital property open to division:
Depositing Inherited Funds into Joint Accounts
If you deposit cash inherited funds into a joint bank account shared with your spouse, you may be indicating intent to gift your spouse half of the money. Joint accounts are presumed to be marital property owned equally by both spouses.
For example, if Wendy deposits her $100,000 inheritance into a joint checking account with John, half of it could be considered gifted to John. To avoid this risk, Wendy should maintain the inherited funds in an account solely in her name.
Using the Inheritance to Pay for Marital Expenses
Using your inheritance to pay for marital expenses or assets jointly with your spouse can also lead courts to treat it as marital property.
For instance, if Wendy uses $50,000 of her inheritance as a down payment on a home in both her and John’s names, those funds could be considered transmuted into marital property. The inheritance contributed to acquiring a shared marital asset.
Co-Mingling Inherited Assets with Marital Property
Courts may view an inheritance as marital property if you co-mingle it substantially with matrimonial assets. This could occur if you use inherited property as collateral for marital debts, improve marital property using inherited funds, or move inherited property into the marital home.
Continuing our example – if Wendy uses her inherited stocks as collateral for a loan taken out by both spouses, the stocks become intertwined with marital debt. The court may see the stocks as matrimonial rather than Wendy’s separate property.
Transferring Ownership of Inherited Assets
Sometimes, spouses transfer ownership of inherited property to make it jointly owned. For example, they were putting both spouses’ names on the title for real estate you inherited.
This can indicate intent to gift your spouse an interest in the property and transmute it to marital property. So, inherited real estate should remain titled solely in the recipient spouse’s name.
Moving to a Community Property State
In community property states like California, almost all assets acquired during marriage are considered joint marital property regardless of who earned or received them.
So, if you receive an inheritance while living in a community property state, it may be deemed community property that your spouse has a one-half interest in. Consult a lawyer if this applies to you.
Failing to Properly Document & Segregate Assets
To prove an inheritance should remain separate property, you must carefully document and track the inherited funds or assets. Clear records showing you maintained the inheritance separately from a marital property is critical.
If you combine assets and lack records, you may need help tracing the inheritance money and overcoming the presumption that it has become marital.
Steps to Protect Your Inheritance in Marriage
To avoid the risks outlined above, consider taking these proactive steps:
- Keep inherited cash in accounts solely in your name – Never deposit into joint accounts with your spouse.
- Use inherited funds to pay only your separate expenses – Do not use them for marital debts or assets.
- Maintain detailed records – Proving the inheritance remains separate requires evidence like bank statements and documentation of asset ownership.
- Store physical inherited property separately – Do not mix with marital property or move into jointly owned homes.
- Do not jointly title inherited assets – Retain sole ownership of real estate, investments, or other property you inherit.
- Seek a postnuptial agreement – A postnup that defines inheritances as separate property can provide clarity.
- Consult an attorney – Get guidance to protect your inheritance in compliance with South Carolina law.
What Happens When an Inheritance Is Divided in Divorce?
South Carolina family court judges can divide some separate property between spouses during divorce if deemed equitable. Though not the norm, a judge could award your spouse a portion of an inheritance you received under certain circumstances:
- If marital funds were used to improve or maintain the inherited property.
- Denying your spouse their rightful share of the inheritance would cause undue hardship.
- If the inherited property increased substantially in value during the marriage through no effort of your own.
- You could retain the inherited property if your spouse made non-monetary contributions as a homemaker.
While rare, these scenarios illustrate that even carefully maintained separate property may be divided if a judge decides it is fair and warranted. Having an experienced divorce lawyer guide you through this process is critical.
Seek Legal Counsel to Protect Your Inheritance
Inheritances can create complex asset division issues when you divorce in South Carolina. It is wise to consult a knowledgeable family law attorney to protect your inheritance as your separate property.
The team at Steele Family Law in Anderson, South Carolina, has extensive experience advising clients on safeguarding inheritances in marriage and divorce. They stay current on precedent and case law changes that may impact how courts view inherited assets.
With proper legal guidance, you can take the right steps to shield your inheritance and avoid it being deemed marital property. Contact their office to schedule a consultation with the team today. They can help protect your inheritance and support you through family law matters.
