Five Ways to Keep Inheritance Separate

Put Cash in a Separate Account

If you inherit cash, or if you sell the assets you inherit for cash, you may want to consider putting the resulting cash in a separate account, preferably one that your spouse does not have access to. Your spouse’s name should also not be on the account that contains your inheritance. Putting your inheritance into a joint account may not automatically give your spouse an interest in the inheritance. If you have your inheritance in an account, putting your spouse on that account may expose you to liability in the event of a divorce. If you intend to maintain your inheritance as separate property, it is a good idea to have your inheritance as separate as possible.

Consider a Post-Nuptial Agreement

Why Keeping Inheritance Separate Matters

In Utah, an inheritance you receive is generally considered separate property, not marital property, which means it is usually not divided in a divorce. But that protection can be lost if the inheritance gets mixed with marital assets. Keeping it clearly separate is the key to making sure it stays yours.

Five Ways to Protect an Inheritance

Keep inherited funds in a separate account in your name only, never a joint account.
Do not use inherited money for shared expenses, the family home, or joint investments.
Avoid adding your spouse’s name to inherited property or accounts.
Keep clear records showing the source and history of the inheritance.
Consider a prenuptial or postnuptial agreement that confirms the inheritance is separate.

The common thread is avoiding commingling, which is when separate and marital property blend together.

How Commingling Happens

Commingling is often accidental. Depositing an inheritance into a joint account, using it to renovate a jointly owned home, or letting your spouse manage it can all convert separate property into marital property, in whole or in part. Once that happens, untangling it is difficult and sometimes impossible.

Protect What Is Yours

If you have received or expect an inheritance, planning ahead is the best protection. A Utah family law attorney can help you set up agreements and practices that keep it separate. Contact our team to protect your inheritance.

Frequently Asked Questions

Is inheritance considered marital property in Utah?

Generally no. Inheritance is usually separate property, but it can become marital if it is commingled with shared assets.

How do I keep my inheritance separate?

Keep it in a separate account in your name only, avoid using it for shared expenses, and keep clear records of its source.

If you are receiving an inheritance during the marriage, you should speak with an attorney regarding the best ways to protect your inheritance. There are different requirements that need to be met to ensure the contract is valid and will be upheld in court. An attorney will likely need to guide you through this and help you decide whether or not a post nuptial agreement is in your best interests. Post-nuptial agreements can be effective when it comes to mitigating a person’s risk. However, it’s important to understand that a post-nuptial agreement was designed to mitigate a person’s risk; a post-nuptial agreement may not eliminate your risk entirely, especially if there are extenuating circumstances that could give your spouse an interest in your inheritance or items and/or assets you’ve purchased with your inheritance. Post-nuptial agreements are most important for those who have inherited a substantial amount of money and/or assets worth a significant amount. Parents of disabled children frequently set aside money for the next of kin to care for the children in the event of the parents’ deaths. If you inherited assets that are intended to cover the cost of a disabled person’s care, it is likely in your best interests to consult an attorney to ensure that those funds are protected in the event of a divorce.

Don’t Use the Money on Marital Assets

Inheritance can become commingled if you use the funds to purchase marital assets. A common issue occurs when a person has an inheritance, but they put the money into the same joint account that they pay all their bills with. When a person does this, it gets difficult to track where the money went, what’s separate, and what is joint. If you do need to use your inheritance for marital debt or bills, you may want to consult an attorney about a loan agreement to ensure that the rest of the inheritance is protected and maintained separately. Remember, you can withdrawal separate property, but once it’s withdrawn and the bills are paid, the money withdrawn is no longer separate, and the court may look at it as a gift. If this issue affects you, it may be necessary for you to hire an attorney to ensure the best possible outcome.

Be Careful when Fixing up the Real Estate

You should be cautious about using inheritance to fix up your real estate property. As previously mentioned, this can cause your inheritance to become commingled. You should also be careful about using marital funds to fix up property that you inherited. If you inherit a home, but you use marital funds to fix up the home, your spouse may have an equitable interest in the home in the event of divorce. It does not matter if your spouse doesn’t earn any income, or the income you used is from your employment alone, or if your finances were completely separate. If you used marital funds to fix up an asset you inherited, your spouse could still potentially have an interest in that asset.

Consider a Trust

If you are expecting to inherit a large sum or a significantly valuable asset, it may be worth considering a trust. In the most simple terms: a trust is like a box that you can put anything into, and you can decide who gets the contents of that box when you pass away. A trust can be created to help keep an asset in the family. Perhaps you have an expensive heirloom engagement ring that you want to keep in the family, or you have a family home that you want to keep in the family. Those things can be put in a trust to ensure that it stays in the family in the event of your death. You can put your inheritance in a trust as well and manage who will receive the house in the event of your death. While this does offer some protection in the event of divorce, the laws vary from state to state and simply putting your inheritance in a trust may not be enough to adequately reduce your exposure during a divorce. Therefore it is important to discuss this with an attorney in the event of divorce.