How to Keep Your Inheritance Your Sole and Separate Property
By: Michelle J. Perkins, Esq.
Now let’s say someone in your family has passed away and you are going to receive an inheritance. You live in Arizona and you are married. Who does the inherited money belong to? You? You and your spouse? Well, it depends, based on how you handle the money or asset when you receive it and how you handle it over time.
In Arizona anything acquired by devise or descent (fancy legal terms meaning inheritance) is the sole and separate property of the receiving spouse as a matter of law. So, when you get the check from the estate of the person that passed away, that money is over 130% yours. You do not have to share it with your spouse nor is your spouse legally entitled to one-half or any portion of it; unlike your paycheck, which your spouse is legally entitled to one-half of.
The next step is where people make the mistake that ends up giving some of those inherited monies to their spouse. Typically married couples have joint accounts and the spouse receiving the inheritance deposits the check into a joint account and commingles the inheritance with community money. Commonly the money then gets spent on a vacation or paying bills or a new car. If that is what you want to do with your inheritance money, you are certainly free to do so; however, in the event of a divorce or legal separation, you will not later be allowed to claim that the community estate is divided and you get your inheritance money back. Once it’s spent, it’s gone. There is no getting it back. And, once it’s commingled the burden then shifts to you to trace or prove which money in the account is your sole and separate inheritance money. Tracing funds through accounts to attempt to prove that certain money is your sole and separate money is very costly. It typically requires hiring a forensic accountant or financial expert and, of course, the legal fees involved in putting it all together and then presenting it to the Judge.
There is a much easier and far less costly way to keep your inheritance your sole and separate property. When you get the check from the estate open a NEW financial account in just your name alone and deposit the check into the new account. The account can be a brokerage account, an investment account, a savings account, it does not matter what type of account you open; it just needs to be an account in your name alone. Once it’s in this account (and left there; do not deposit other funds to this account, such as last year’s bonus or other monies) it’s easy to identify as being the money from your inheritance and in the event of a divorce court will award that money to you and divide the community estate between you and your spouse. And, if you decide you want to take the family on vacation with your inheritance money, you are free to pull money from that account and take the family on vacation. There are no restrictions on what you can use the money for, you just need to be aware that if you spend your inheritance, the money is gone and you will not get it back regardless of what you spent it on.
If you would like more information about how to best handle your inheritance, please call OWENS & PERKINS at 480.630.2464 to schedule your free 30-minute consultation with one of our experienced attorneys.