When one spouse has significantly more assets or income than the other, their divorce could be considerably more complicated than one between spouses on equal financial footing. Consider, for example, when one party receives an inheritance. Is it supposed to be divided between the spouses? How can it affect important divorce issues, like the division of assets and spousal support?

Having a strong legal team on your side can make navigating this time much easier. Let us help. Call Olmstead & Olmstead at 703-260-8752 to set up a consultation with our team now.

When Does an Inheritance Become Marital Property According to Virginia Law?

Virginia, like most states, uses the legal principle of equitable distribution for dividing marital assets during a divorce. This is not a simple 50/50 split. Instead, the court aims for a fair and just division for both spouses.

A variety of factors are considered. These include each party’s financial and non-financial contributions to the marriage, their individual earning capacities, any separate assets they own, and the standard of living they enjoyed. The court’s goal is to ensure a balanced outcome that reflects the reality of the marriage.

Under this framework, inheritances are not typically considered shared or marital assets. The law treats an inheritance like a gift given to one spouse from an external party. As a result, it is generally considered the sole and separate property of the spouse who received it.

This principle applies whether the inheritance was received before or during the marriage. For the most part, an inheritance remains with the inheriting spouse and is not subject to division in a divorce.

When Separate Property Becomes Marital Property: Commingling

While the general rule is that an inheritance is separate property, this is not always the case. There are specific situations where a separate asset, including an inheritance, can lose its separate character and become a marital asset.

This process is known as “commingling.” It is one of the most significant pitfalls for an individual trying to protect an inheritance. Commingling can turn your sole property into a shared asset that can be equitably divided by the court. Once commingled, it becomes incredibly difficult to “trace” the asset’s separate origins.

One of the most common examples of commingling involves cash. Imagine one spouse receives a large cash inheritance from a deceased parent. They decide to deposit the money into the couple’s joint bank account instead of keeping it separate.

Over time, both spouses deposit money into this account and withdraw funds for shared household expenses. By the time a divorce is initiated, the original inherited funds are no longer identifiable. They have been mixed with the couple’s joint income.

In this situation, a Virginia court would almost certainly rule that the commingled inheritance has become a marital asset, subject to equitable distribution.

Commingling can also occur with non-liquid assets like real estate. For instance, a spouse might inherit a beach house. If the couple uses marital funds to pay for property taxes, insurance, or significant renovations, the house’s separate status could be at risk.

A court may find that because marital funds were used to improve or maintain the property, the couple now has a marital interest in it. The same logic applies if a spouse inherits a business and uses joint funds to expand or run its operations.

By using shared resources to improve, maintain, or manage an inherited asset, the non-inheriting spouse may be able to claim a marital interest in the property. This can complicate divorce proceedings and potentially lead to their division.

Strategies for Protecting Your Inheritance

Given the significant risk of commingling, it is crucial for anyone who has received or expects an inheritance to take proactive steps to protect it. The most important action you can take is to keep the inheritance separate from all marital assets.

You should maintain the inheritance in a separate account that is solely in your name. This is true whether the inheritance is cash or a stock portfolio. Do not deposit any of your own income, your spouse’s income, or any other joint funds into this account. The moment marital funds are mixed with inherited funds, the risk of commingling begins.

Similarly, avoid using the funds in this account for shared expenses or family investments. Any assets purchased with the inheritance—be it a car, a piece of art, or a new home—should be titled only in your name and should not be maintained with marital funds.

For couples contemplating marriage, a prenuptial agreement can be a powerful tool. These legally binding contracts can specify that any property received by one spouse, including inheritances, will remain their separate property regardless of how it is used.

For those who are already married, a postnuptial agreement serves a similar purpose. These agreements can clearly state that an existing inheritance is and will remain separate property, providing legal certainty in the event of a divorce.

The Impact on Spousal and Child Support

While an inheritance may be considered separate property, it can still significantly impact other aspects of a divorce, particularly spousal and child support. Virginia law mandates that courts consider a number of factors when determining support, and a significant inheritance can influence that calculation in several ways.

For the party who would otherwise be required to pay spousal support, receiving a large inheritance will likely be viewed by the court as an increase in their ability to pay. Even if the inheritance is not considered income, the income it generates from investments can be a factor.

The court will not allow a spouse to simply stop working and live off their inheritance to avoid their support obligations. The court will likely consider the inheritance when calculating their financial standing and may even impute an income based on the value and potential earnings of the inherited assets.

A large inheritance can also affect a party’s eligibility to receive spousal support. Alimony is often awarded to help the lower-earning spouse become self-sufficient after a divorce. If that individual receives an inheritance substantial enough to cover their living expenses, a court may determine there is no longer a “need” for spousal support.

In such a scenario, the court might deny an alimony request or terminate an existing support order. The goal of the court is always to establish an equitable solution based on each party’s full financial picture, and a major inheritance is a key component of that picture.

Prepare for Your Divorce with Olmstead & Olmstead

As you consider how you want to move forward with your Virginia divorce, make sure you have the team at Olmstead & Olmstead by your side. Fill out our online contact form or call us at 703-260-8752 to set up a time to talk with our family law team.