Divorce can be emotional. Dividing up the assets that you and your spouse acquired during the marriage can make the process even more difficult. In addition, your spouse is asking for a portion of your inheritance. Undoubtedly, you will want to know if this is possible under North Carolina law.
Like so many legal questions, the answer is, it depends. It’s important to first understand how property is divided during divorce in North Carolina.
North Carolina Is An Equitable Distribution State
This means that, per North Carolina statutes, all property acquired throughout the time you were married, marital property, will be divided fairly between both spouses at divorce.
There is a second type of property considered in divorce, known as separate property. Separate property is any property that one spouse acquires before the marriage, as a gift, or by inheritance. This property will not be equitably divided but will remain the property of the original owner.
Based on the statute, it appears that property a spouse inherits is separate property, will remain with the original owner, and will not be divided by the courts. This is not always true, however, and there are several factors that can preclude a spouse from keeping inherited property at the exclusion of an ex-spouse.
When An Inheritance Becomes Marital Property
Although the statute makes clear that property inherited by one spouse is separate property and not to be equitably divided, there are cases where separate property will “convert” into marital property. This transmutation, or the conversion of separate property into marital property, commonly occurs in one of two ways: jointly titling assets that were purchased with separate property and commingling or the use of separate property for marital purposes. If separate property becomes marital property, it will then be subject to equitable division along with the rest of the marital property.
The question of whether your ex-spouse is entitled to your inheritance centers around the question of whether your inheritance became marital property at some point during the marriage.
Jointly Held Real Property
In North Carolina, it is presumed that any real property held as tenancy by the entirety (owned by both spouses), acquired after the date of marriage, is marital property.
Therefore, if a spouse inherits a sum of money and uses that money to purchase a piece of real property, then titles it as tenancy by the entirety with his or her spouse, the court will presume the property to be marital property. Even if the spouse can prove that the purchase of property was made with separate property, i.e. an inheritance, the act of titling the property in both names can be viewed as a marital gift. In North Carolina, any gifts given between spouses while married are considered “marital gifts” and are treated as any other marital property – subject to equitable distribution.
Commingling And The Use Of Separate Property For Marital Purposes
Commingling is mixing property belonging to one spouse, with the other spouse’s property. For example, if you inherit a sum of money and comingle the funds with marital funds by depositing the inheritance money in a jointly held bank account, the funds may be viewed as marital property. It can be difficult to prove the funds are separate or were not intended to be marital property once the property is commingled.
In addition, the use of separate property for marital purposes or for a purpose that benefits the marriage, may be seen as converting separate property into marital property.
Protecting & Controlling Your Inheritance
In the end, if your inheritance has not been commingled or jointly titled, and has retained its status as separate property, then your ex-spouse will not be entitled to any portion of the inheritance.
In the above situations, the inheritance did not retain its status as separate property due to how the property was utilized during the marriage, whether by jointly titling property and creating a marital gift or by commingling separate and marital property. In these cases, an ex-spouse will likely be entitled to a portion of the inheritance.
Assuming you haven’t already taken steps to protect your separate property, is there a way, then, to keep your entire inheritance and avoid transmutation of separate into marital property?
Once the divorce is filed, it is likely too late to attempt to protect an inheritance if commingling has occurred. The methods of protecting separate property usually need to be implemented prior to the marriage or, at least, prior to receiving an inheritance. For example, couples can enter into a prenuptial agreement before marriage to designate how the property will be divided at divorce. Another way to avoid commingling is to keep separate property, separate. If you receive an inheritance, keep it in a separate bank account and title purchases made with the inheritance in your name alone. Even doing this, however, may not fully protect separate assets, including an inheritance, from equitable division.
Know Your Rights
Speak with an attorney to know for sure whether your inheritance retained its status as separate property. Equitable distribution, along with transmutation and commingling, can be quite complex. Talking with a qualified family law attorney can help ensure your rights are protected.
“NCGA North Carolina General Assembly.” North Carolina General Statutes Chapter 50: Divorce and Alimony.” NCGA. 8 April 2018. https://www.ncleg.net/EnactedLegislation/Statutes/HTML/BySection/Chapter_50/GS_50-20.html
“Commingling.” Wex. Cornell Law School. Web. 10 April 2018.
“Transmutation.” FindLaw Legal Dictionary. Findlaw. Web. 12 April 2018.