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When Are Inheritance, Gifts, And Trust Included In Equitable Division?

Updated: Feb 5, 2023

How do you handle inheritance and gifts during a divorce? This is a tricky question that lingers in many people's minds. Equitable division after divorce is challenging, and you need to know how to navigate it. Frequently your parents will leave

you a substantial amount, and you want to protect it during the divorce process. Sometimes the inheritance money comes at a poorly timed time when you cannot control it. Knowing about the tips for handling gifts or inheritances can be critical. It can also help you protect the trust, property, or funds you may have to split because of the divorce process. The first tip is that if you receive an inheritance or a gift, keep that under your name. If a parent passes away and leaves funds in your name, do not deposit those funds into a joint account. Instead, keep a separate bank account under your name, and call it an inherited funds account. If the funds come with the other assets, they will be included in the equitable division during a divorce.

Complications May Arise

It is not every time that your inheritance is a gift. It can also be property, a car, or any other type of wealth. Distributing these forms of wealth can be very difficult and may require a long, drawn-out process. It is essential not to let your spouse contribute to that gift or inheritance. For example, if you inherit a house that is not in good condition. If you allow your spouse to contribute financially to the repairs, the value increase of the house will come into question as part of the divorce process. Sometimes, this could be a house you renovated some years ago, and the divorce process happens today, making you wonder whether any part of that house is marital property because your spouse helped pay for the house's upkeep. For this reason, you need to be careful and think carefully about what you will do with the inherited property. If you can keep your spouse from contributing financially, it will be of your benefit.

Transfer the Inheritance to a Trust

You can consider transferring the inheritance to a trust. A parent proficient in estate planning will often give you the inheritance and require you to put it in a trust. Doing so will protect the inheritance or gift during the equitable division process of a divorce proceeding. It is beneficial for the recipient to put their inheritance or gift in a trust. There are many complications and nuances of having a trust set up. If you have an inheritance coming or you recently got one, look for an estate planning attorney, and they will illustrate options for you to set up a trust. This will help you protect your assets during a divorce. Another helpful suggestion would be to keep good records about where the inheritance came from and all the other traces of the inheritance. One of the most common mistakes people make is that they do not keep track of the details of an inheritance. This mistake can set you up for significant losses, and you may lose your inheritance in the divorce process since you did not keep accurate records.


Make sure you keep track of any bank statements, documentation, and lawyer's correspondence to ensure that your information about the inheritance is safe. If you use the inheritance as a down payment and do not have a record of that inheritance, you will not get a fair share of the equity during the divorce. You still may be able to get credit for that money as part of the divorce process if you have accurate records. However, it would be best if you ensured that your documents are highly accurate. On the other hand, if you don't keep the correct forms, you may lose those funds, and equity will become costly. If you've received multiple gifts from your parents, you need to have documentation from your parents as well. This can also be helpful and allow you to prove that the funds came from at the time of the divorce. Establishing that the funds were directed to you can help you regain the money at the time of the divorce.

Tips Summary

To go through the discussion mentioned above, the division of inheritance or gifts can be challenging for a couple going through a divorce. Claiming exclusive/separate ownership when it is not officially under your name will require you to present additional documentation proving ownership. To avoid more complication, you must keep the inheritances and gifts under your name. Moreover, avoid letting your spouse contribute to the account/property because if that occurs, it is most likely that account will be identified as comingled and will be subject to equitable distribution. Contacting an estate planner and considering transferring the gift to a trust is also great.

Final Words

Having the right professional can help you navigate the issues with trusts, inheritance, and gifts during a divorce. If you are facing such a problem and do not know where to start, we at TriDialogue Mediation is here to provide excellent assistance.

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