If you received an inheritance from a loved one and are going through a divorce, you may be wondering whether your inherited assets are subject to division, along with your other property. Navigating property division when you are parting ways with your spouse can be complex — especially when an inheritance in divorce is at issue. While inheritances are generally considered non-marital property and excluded from division in divorce, there are many nuances to be aware of.

How is Property Divided in Divorce?

Before the question, “Is inheritance split in divorce?” can be answered, it’s essential to have a basic understanding of how property is divided by the courts. Minnesota follows the doctrine of equitable distribution when it comes to dividing property in divorce. This doesn’t necessarily mean property is divided equally — it means judges strive to divide property between spouses in a way that is deemed fair. Couples can also resolve property division issues outside of court using out-of-court settlement methods like mediation, the collaborative process or other unbundled or limited scope services.

Notably, only marital property is subject to equitable distribution in divorce. Marital property is considered any asset acquired by either spouse during the course of the marriage, regardless of who holds ownership. Separate or nonmarital property is characterized as any asset acquired by either spouse prior to the marriage. However, there are some exceptions to these general rules — such as in cases involving inheritances or family gifts to one spouse, but not the other, received during marriage.

Is an Inheritance in Divorce Considered Marital Property?

An inheritance is typically characterized as a spouse’s separate property, regardless of whether it was acquired during the marriage or before. This means that your inheritance is generally not subject to division in divorce, whether it was cash, held in a trust, stocks or bonds, an inherited IRA, real estate, personal property, a life insurance policy, or other assets. But there are some important exceptions to the rule that an inheritance in divorce is treated as non-marital property.

When Can an Inheritance Become Marital Property?

If an inheritance is mixed with marital assets, it would be considered “co-mingled.” When commingling occurs, it can become difficult to trace the origin of the property. In such cases, the court may deem some or all of the commingled assets to be marital property and subject to division. Commingling with an inheritance often arises when the inherited assets are deposited into a joint account. It can also occur when inherited assets are used to:

• Pay marital debts
• Pay the mortgage on the marital home
• Make improvements to the marital home
• Invest in a marital business
• Purchase a vehicle that is titled in both spouses' names

Another exception to the rule that treats an inheritance in divorce as non-marital property can arise in cases where the inheritance was granted to both spouses. The creator of the will may have specifically named you and your spouse — or they might have specifically granted the inheritance to an individual and “their spouse.” In either of these situations, the inheritance would be considered marital property that is subject to division in divorce. If an improvement to the marital home is from inherited assets, it might be considered non-marital if it can be shown that the value of the home increased due to the investment, but it might not be a dollar for dollar return.

In any case, someone wanting to claim an asset is nonmarital has the burden to prove that the asset is nonmarital because all assets acquired during the marriage are presumed to be marital. They need to be able to trace the nonmarital dollars from their original source to the asset they claim holds the nonmarital funds, unless a spouse agrees that assets are nonmarital.

How Can You Ensure Your Inheritance in Divorce is Protected?

Although commingling can make your inheritance lose or dilute its status as separate property, there are certain steps you can take to ensure that your inheritance in divorce will be treated as a non-marital asset.

The best way to protect your inheritance is by executing a prenuptial or postnuptial agreement. While a prenup is entered into before marriage, a postnup can be signed at any point in time during your marriage. Regardless of whether you anticipate divorce at the time you receive your inheritance, a postnup can give you an opportunity to ensure it will be characterized as separate property if you did not sign a prenup before your wedding.

Another way you can protect your inheritance in divorce is by keeping it in a separate account when you receive it. Be sure the account is only in your name and marital funds are not deposited into it. This can help to maintain the status of your inheritance as separate property. In addition, avoid using the inheritance for marital expenses, such as renovating the marital home — this can lead to commingling and complicate the issue of property division. If you do use funds for marital expenses, it can be deemed a gift to the marriage. Keeping documentation of the inheritance when received and where it is held is always a good practice, as well.

Contact an Experienced Minnesota Divorce Attorney

If you are concerned about your inheritance in divorce, it’s essential to work with a knowledgeable divorce attorney who can advise you regarding your rights and options. At The Law Shop Minnesota, attorneys Louise Livesay and Peter Ladwein are committed to helping clients across Minnesota with a wide range of divorce and family law matters, including those involving complex property division matters. The Law Shop Minnesota does prenuptial and postnuptial agreements if you want to create a record and agreement of nonmarital assets prior to or during a marriage.

With a focus on finding creative solutions and resolving divorce and family law cases with respect, clarity, and compassion, our attorneys can also provide referrals to experienced family specialists and mental health professionals. In addition, our lawyers can help assess whether your matter is appropriate for the collaborative process or not and help you determine what process option is the best fit for you.

To schedule a consultation—either in person or via Zoom, anywhere in Minnesota—please contact us online or call (651) 344-6100.

Louise Livesay has over twenty years of experience guiding families in the Twin Cities and greater Minnesota through peaceful, out-of-court resolutions. Whether you’re exploring collaborative divorce, mediation, or unbundled legal services, we can provide you with a variety of flexible, client-centered options.

Peter Ladwein is passionate about protecting families and their legacies. With firsthand experience with a special needs family member, Peter brings a deeply personal understanding to his legal practice. Peter is licensed to serve clients across Minnesota and Illinois.