Inheritances in Divorce
In a divorce proceeding, many couples anticipate that the finances that they have accrued throughout their marriage may be split up and divided between them. A family home that was jointly purchased, retirement accounts that have accumulated over the years, or even a yearly performance bonus can be subject to division. What many people do not realize, however, is that even money obtained prior to a marriage can be subject to review in a divorce. At Reddin & Singer, LLP, our Milwaukee divorce attorneys can advise you of Wisconsin’s rules concerning inheritances in divorce.When an Inheritance is Exempt from Division in a Divorce
In Wisconsin, most assets acquired by either spouse during the marriage or even prior to the marriage are considered marital property and can be divided as part of a divorce. This means that even money brought into the marriage by one spouse, such as a pre-existing retirement or investment account, eventually becomes part of the marital property.
However, Wisconsin law also provides that money received from a third party, such as a gift or an inheritance, is exempt from consideration as marital property and need not be considered in a divorce. This means that most inheritances will not be subject to division, assuming, as discussed below, that they are kept separate from other marital property.Avoiding Co-Mingling of Inheritance Funds
While inheritances may generally be exempt from division in a divorce, complications arise when those funds are co-mingled with marital property or used with donative intent. Co-mingling of property occurs when the inheritance funds are mixed with other mutually held funds, such as by mixing inheritance money with a jointly held investment account. Co-mingling can also occur when inheritances are mixed with jointly held funds to buy a piece of marital property like a home, a piece of art, or a car. In these situations, it can become difficult, if not impossible, to determine how the funds should be returned to their original owner.
Additionally, even if it were possible to readily transmit the inheritance funds back to the spouse who owned them, Wisconsin courts hold that such funds should not be returned if there was a clear “donative intent” to donate the funds to the marriage.Determining Donative Intent And Protecting Your Inheritance
Courts determine whether donative intent exists by looking at a variety of different factors. These can include the nature of the relationship, the history of the parties in making similar contributions, the circumstances of the transactions, and any words or writings that may have memorialized their intent. In an ideal world, spouses could protect against the co-mingling of their inheritance funds by simply keeping them in separate accounts held only in their name. However, this may not always be possible. Simplicity, account limits, or the need to have someone manage the funds may require funds to be moved around. Spouses may also want to use some of the funds toward a purchase that will benefit them but also benefit their spouse as well.
In these cases, to avoid the risk of the entire inheritance being considered co-mingled, the spouse who possesses the inheritance may want to separate out the portion that will be used for marital expenses and leave the remaining inheritance safely in a separate account. When contributing the funds to a joint goal, be careful to thoroughly document the funds being provided and why they are provided. At worse, the spouse risks losing only a small portion of the available inheritance and, at best, may find that a court grants them all of it upon a divorce.Contact a Knowledgeable Milwaukee Lawyer During Your Divorce
If you are considering the possibility of a divorce, you may find it helpful to determine how your finances may be affected and what your financial future likely will look like. If you have funds that you brought into the marriage, but you are not sure what you will receive after a divorce, the Milwaukee attorneys at Reddin & Singer, LLP can walk you through Wisconsin’s divorce laws, their impact on assets like inheritances and retirement accounts, and the possible effect on your post-divorce financial future. Contact our office at (414) 271-6400 or online to speak with a property division lawyer. We represent people in Milwaukee, Port Washington, Racine, West Bend, Waukesha, and other areas of Milwaukee, Ozaukee, Racine, Washington, and Waukesha Counties.