Is Your Inheritance at Risk During Divorce?
Inheritance is what you receive from someone who has recently died. Many families take inheritance seriously because someone has worked hard to build funds and assets in order to pass their legacy down to future generations. For this reason, many people want to ensure that the inheritance stays within the immediate family, but this may be complicated by divorce as one person is essentially leaving the family. This brings up concerns on multiple levels, including concerns about whether you or your children will be disinherited after a divorce.
Vested Versus Unvested Assets Versus Expectancy Interest
In the state of Massachusetts, when a couple is divorcing, all of their assets must be divided. A past, present, or future inheritance is one such asset. There are many types of assets that one or both spouses may have coming to them but might not be guaranteed. This is the difference between vested, unvested, and expectancy interests in the asset.
A vested asset is something that you are sure to get in the future. An unvested asset is a form of property that has conditions attached to when and whether you actually receive the asset. An expectancy interest is when you think and hope you might receive something that’s not in your possession, but there’s a possibility you might not.
An example of an unvested asset that may be divided in divorce is a pension. Pensions often have lengths of time that you must be employed within the organization in order to qualify for the pension in the first place and, then, are only paid out when you reach the age of retirement. Your interest vests at a certain point (the length of service being met) but then you also have to stay alive to collect on the pension (although there would likely be death benefits paid out if you die early). In divorce, a pension may still be divided even if the interest in the pension has not yet vested.
An inheritance is generally considered an expectancy interest because, the person who would be leaving the inheritance can still change his or her mind about how much or even whether you will actually get anything when they die. A future inheritance is something you might expect to receive someday, but is not fully guaranteed or assured. Based on this factor, Massachusetts courts will usually not divide these assets in court because the factors are too imprecise and speculative to rule on. However, the Court might take a future inheritance into consideration when looking at the factor involving the opportunity of each spouse for future acquisition of capital assets and income.
Inheritance Through Trust
We won’t go into too much detail about trusts here, but if you are going to receive your inheritance through a trust that was set up to be irrevocable, then that changes things because now the person leaving you that money or property is not able to simply change that by changing their will. If you or your spouse is going to obtain assets through an irrevocable trust, then the amount to be received can play a more important role within the division of assets than assets that are simply named as going to you or your spouse through a Will.
Is the Inheritance I Already Received Divisible in a Divorce?
The short answer is that anything that you receive during the marriage is marital property and divisible within the divorce, so yes. However, that answer gets more complicated depending upon what exactly was inherited and how it was used once you got it. If you inherited a home that you and your spouse then lived in and put money into repairing, the home now might be considered comingled and your spouse may have to be paid out for his or her interest in the home. If you received $250,000.00 and immediately put it into a separate account held individually in your own name, there’s a better chance the Court might say that’s all yours and not divide it. There is no black and white answer when it comes to inheritances that were received during the marriage (including inheritances that are in probate during the divorce) and the outcome of how or whether it gets divided really comes down to a case-by-case basis.
What if My Parents Give Me My Inheritance While They Are Still Alive?
A person may gift someone else money during their life which they would have otherwise transferred after they died within the typical inheritance fashion. If this is the case, a good family law attorney or even an estate and trust attorney can advise you on how to keep that money separate so it does not comingle with marital money. You could also insist on a post-nuptial agreement (just like a prenuptial agreement but one that is entered after you are already married) stating that the other spouse will not have any interest in that money or property gifted to you. If you receive it during the marriage though, the harder it is to argue that it should be considered individual property and not divided within the divorce.
How Can I Protect My Inheritance?
The best way to protect an inheritance you have already received is to keep it separate from all marital property. Marital property includes any assets shared jointly by both spouses such as joint bank accounts, marital homes, or shared vehicles. The second you use the inherited money or asset to benefit the marriage, the greater the chance is that you will have to split it up some way within a divorce. You should save any documentation which proves that the inheritance is solely for you and is not meant as a gift to your marriage. Lastly, if you have children a great way to protect your inheritance is to place the funds into a trust listing your children as the only beneficiaries. The downside is that, depending upon how you set up the trust, you might not have the ability to access, sell, or transfer the assets.
Contacting a Lawyer
If you or a loved one is concerned about a past, present, or future inheritance being at risk due to divorce, it is best to contact a lawyer immediately. At O’Connor Family Law, we are experienced with the division of assets during a divorce and can help you protect the assets that your family intends to leave to you.