By David L. Duff of Duff & Kronfeld, P.C. posted in Family Law on Wednesday, June 19, 2013.
In this day and age where almost 55% of all marriages will end in a divorce; and, where the cost of even an uncomplicated divorce can involve attorney’s fees into the tens of thousands of dollars, a little “advance planning” may be prudent. Nowhere is this more apparent than in the common situation where one spouse receives an inheritance during the marriage.
If, for some unforeseen reason, a divorce should occur, Virginia’s “equitable distribution” law provides that any inheritance received during the marriage remains the “separate” property of the recipient spouse, and is not to be divided with the other spouse. This sounds to be both logical – and fair. HOWEVER, Virginia law could never allow things to be that simple, so a condition was added which has to be met before the inheritance is considered to be “separate” property. The condition is this: the recipient spouse must have always treated the inheritance as though it were his or her separate property.
At first blush, this would not seem to be too great a requirement, but upon closer scrutiny the potential pitfalls became apparent. Most often an inheritance is in the form of money, which the recipient spouse deposits into a bank account, or investment brokerage account, in joint names with the other spouse. Or, the money is used to buy a new car that ends up being titled in joint names. Or the money is used as, or towards, a down payment on a new house, the Deed to which ends up being held in the names of both spouses.
Under each of the all-too-common scenarios described above, the spouse receiving an inheritance has unknowingly, and most likely unintentionally, failed to treat the inheritance as “separate” property. The consequence of such failure is to destroy the nature of the inheritance as “separate” property, belonging 100% to the recipient spouse, and convert the inheritance into “marital” property to be “equitably distributed” between both spouses, if a divorce should later occur.
A bit of “advance planning” prior to receipt of the inheritance could have easily insured that the recipient spouse would always remain the sole, legal owner of that inheritance. He or she remains free to use the money for various family purposes, and can satisfy any compelling need for generosity, while still treating the inheritance as precisely what it was originally intended to be – “separate” property!