Is My Inheritance Considered Community Property?

Posted in Community Property,Prenuptial Agreements,Property Division on July 13, 2020

One of the main issues every divorce case involves is property division. How a judge will divide the property, assets and debts you and your spouse have acquired during marriage will depend on the laws in your state. California is in the minority as a community property state. This law means your ex-spouse could receive half of your assets, regardless of the circumstances. Luckily, there are steps you can take to protect property such as your inheritance.

What Is California’s Community Property Law?

Property division is a complicated part of a divorce case. It can become even more complex if you and your spouse are a high-earning or high-asset couple. High-asset divorces can be tense and often involve contested terms. A contested case will go to court for a judge to decide property division based on California’s community property laws.

State law in California holds that both spouses are entitled to equal shares of community property. Property can include bank accounts, cash, stocks and bonds, clothing, cars, properties, furniture, and collectibles. Community property describes everything the couple acquired during the marriage. It can also refer to assets brought into the marriage by each party if the couple commingled these assets. Creating a joint bank account is an example of commingling assets.

When a couple marries or registers a domestic partnership, the two legally become a community. Debts and assets acquired thereafter become community property. In California, the courts will divide all community property 50/50 in a divorce case, regardless of fault for the divorce or the financial situations of either spouse. It will not matter if only one spouse brought the majority of the earnings or debt into the marriage. The court will split everything in half during a divorce trial.

In an equitable distribution state, on the other hand, the courts will analyze the unique factors of the case before allocating a percentage of the property and/or debts to each spouse. Equitable distribution states will assess fault, financial hardship, child custody and other factors before making a property division decision. California’s strict community property law makes it important to be proactive about protecting your assets in a divorce case.

How Can I Safeguard Inheritance From a Soon-To-Be Former Spouse?

A few options may be available to you in terms of preventing your property from going to your soon-to-be former spouse in a California divorce case. First, avoid commingling your property. Keeping your bank accounts separate from the beginning of your marriage could safeguard your individual earnings and assets. Avoid mixing your assets and trying to separate them later, as this can get very complicated.

In general, one spouse’s inheritance (as well as gifts given to one spouse) will remain separate property during a marriage in California. An exception exists, however, if you assign joint ownership to your spouse, such as you both signing your names on a vehicle title. The best way to avoid your inheritance going to your spouse is by keeping it separate. Deposit your inheritance into a personal, non-joint account. This will keep it separate property rather than it joining the community.

Do not purchase anything that is for both you and your spouse with your inheritance money. This could lead to it becoming part of the community property. For example, if you receive a home as an inheritance, sell it and purchase another property with your spouse using the money from the sale, the home will become community property. It may then be impossible for you to separate and keep 100% of the inheritance in a divorce.

If losing your inheritance is something that concerns you, work with a Solana Beach family attorney to create a prenuptial or postnuptial agreement that protects your individual assets. Your spouse will be obligated to follow the terms of a valid prenup/postnup during a divorce in California. Even without this safety net, however, a divorce lawyer could help you safeguard your inheritance and other assets. Contact an attorney right away for assistance with your divorce in Solana Beach.