Most of the property owned by a married couple is shared and considered community property, however, the issue of inheritance can make determining ownership a complex situation. Here is everything you need to know about inheritance as community property in California.
Inheritance is considered any assets or estates that are passed down to individuals after the death of an individual. If an individual, such as a family member or friend, has passed and left property to you in their will, you are legally entitled to it. However, a married individual may be concerned that their spouse also has rights over the inheritance due to community property laws of marriage.
The Difference Between Community and Separate Property
It can be difficult to determine how property is divided while navigating a divorce from your partner. Most property that is accumulated during a marriage is considered shared property, but there are important distinctions to be made on whether or not property is separate or communal when it comes to divorce. Here is how community and separate property is distinguished.
Community property is considered to be all property that spouses shared during the marriage, including all property that was bought or earned, and even all debt that was accumulated. The earnings of both spouses during the marriage are considered community property and thus divided at the time of divorce. When determining if an item is community property, a spouse can trace the money used to purchase the item in question. For example, if Partner A purchased a new car with their paycheck that was earned during the marriage, technically the car would be community property because the paycheck was granted while the marriage was still intact. Additionally, all debts that are acquired by Partner B during the marriage would directly be shared by Partner A at the time of divorce. The only exceptions to community property are inheritance or gifts, which are not included in the classification of community property even if they are acquired during the time of marriage.
Separate property is defined as any property that was owned by a partner prior to the marriage, or any inheritance or gifts that are received by a partner. For example, if Partner A owned a car prior to the marriage, it would remain to be Partner A’s sole property at the time of divorce. Gifts and inheritance are slightly more complex, as they are strictly the property of the receiving spouse even if granted during the marriage. Partner B would not have a claim on the inheritance given to Partner A at the time of their grandmother’s death for example. Finally, an important distinction to make is that all property purchased with separate property is still classified as separate property. So if Partner A wanted to use the inheritance money from their grandmother’s death to buy a new car, then the car would only belong to Partner A. This standard ensures that all inheritance received by a married individual remains separate property.
There are also situations where not all items are distinctly listed as community property or separate property because they have become mixed together over time. For an individual concerned about their inheritance, it is crucial to try to avoid commingling so they can ensure their full rights over their inheritance.
Commingling is a complicated situation, but it can happen frequently. An example of commingling would be if Partner A owned a house before the marriage, sold it, and then used the proceeds to secure a down payment on a new house after the marriage. The down payment on this new house would still be considered separate property because it was paid for with separate property. However, if the mortgage payments on the new house are paid interchangeably by Partner A and Partner B throughout the marriage, then the resulting value from continuously paying the house loan would be community property. Thus, the final value of the house is commingled, and it can be quite difficult to determine who gets the house at the time of divorce.
A spouse can avoid commingling and jeopardizing their inheritance by keeping their bank accounts separate from the beginning of the marriage. Additionally, it may be helpful to deposit the inheritance money into a personal, non-joint account. This will keep it separate and protected. It is also best to avoid spending anything for you and your spouse with the inheritance money, as this can complicate the ownership of the inheritance.
If you have any more questions about inheritance and property division, contact us. We’ll get you in touch with an attorney that can answer any questions you may have and help protect your rights. Get your free consolation with one of our property division attorneys in California today!