When two people walk down the aisle, they don’t anticipate going from “I do” to “I don’t.” Still, divorce happens and absent a pre-nuptial agreement (and sometimes, despite one), asset division can and does often become contentious.
Very often, during the course of a marriage, one partner receives a gift of money, cars, jewelry, etc. from a parent or other relative. Too, parents pass and leave money to their children. Are these gifts and inheritance divided in a divorce?
Yours, mine and ours
When a parent or relative purchases a vehicle for you, titles it in your name and expressly identifies that it is for you and you only, that vehicle remains yours upon divorce. But, what about a gift of money? The IRS allows tax-free gifts to individuals of up to $15,000 per year (2020 exclusion). Perhaps your parents are financially able to give you that every year. Is that money yours to keep upon divorce?
Again, as long as the money was given expressly to you and you alone, upon divorce, it is yours to keep. Unless – you knew there was an unless.
The money is yours to keep unless it has been co-mingled with marital money/assets. For example, your house was purchased and maintained with marital funds, and you use that $15k to pay down your mortgage — you co-mingled your separate money with marital money. Division then becomes marital and assets become murky.
The same is true of inheritance
Similarly, inheritance belongs only to the spouse to whom it was bequeathed. Inheritance maintained in a separate account, with no marital funds added, is your separate property. Add one dollar of marital funds or use it to buy a vacation home that is maintained with marital funds, and you will suddenly find yourself in court defending that it is yours and yours alone.
No one wants to spend excess money dividing their money. Engaging a family law attorney when money and gifts come your way ameliorates, or eliminates, the need for drawn out negotiating in the event that your marriage ends. Prepare now – or perhaps pay later. The choice is evident.