Can I Protect My Inheritance From Divorce In Arizona?

When one spouse has a significant inheritance, it adds a new layer of concern to the already distressing divorce process. It’s understandable that an heir feels that their inheritance should be theirs alone and that they shouldn’t have to share it with a spouse during a divorce. But is it possible to protect an inheritance from becoming marital property and subject to division during an Arizona divorce?

According to Arizona Revised Statutes § 25-213, the law states the following:

“A spouse’s real and personal property that is owned by that spouse before marriage and that is acquired by that spouse during the marriage by gift, devise or descent, and the increase, rents, issues and profits of that property, is the separate property of that spouse.”

Is an Inheritance Always Separate Property In Arizona?

An inheritance is generally considered separate property during a divorce, even if a spouse received the inheritance during the marriage. However, there are times that one spouse’s inheritance becomes commingled with the other’s, leaving it subject to division in some circumstances. For instance, commingling often occurs in the following circumstances:

• When a spouse uses all or part of an inheritance to buy a marital home or a rental property that earns income during the marriage, it becomes part of the marital assets and is subject to division
• If the inheritance is deposited into a joint bank account or invested into an asset under both spouses’ names, it becomes marital property
• Buying joint assets such as a car or household items with an inheritance makes that portion marital property
• If inheritance money is used to buy a separate property with only the inheritor’s name on the deed, the property’s improved value could become marital property if the other spouse invests time, talent, or money into improving the separate property

In any of the above circumstances, the non-inheriting spouse could have a significant claim on a portion of the marital assets unless the inheriting spouse has a compelling paper trail to show that they kept their inherited assets separate from the marital pool.

Protecting an Inheritance From Becoming Commingled Marital Property

If you inherited assets before or during your marriage, the following methods help ensure that you maintain the assets as your separate property during the marriage and in the event of a divorce:

• A prenuptial agreement signed by both parties before the marriage can delineate the inheritance as the inheriting spouse’s separate property in the event of a divorce, with specific terms set in place for how the property will be handled to maintain its separate property status
• Spouses can sign a post-nuptial agreement at any point during the marriage, for instance, if one spouse receives an inheritance and wishes to protect it as separate from the marital community for the purpose of passing it down to an heir or to protect it in the event of a divorce
• The inheriting spouse can prevent commingling the inherited asset by placing it in a separate account and carefully tracking all transactions and purchases to maintain the asset as separate
• If the inheriting spouse uses the inheritance to purchase an asset, they put their name alone on the deed or title and keep any funds generated by the asset in a separate account to avoid commingling with their spouse

Spouses who stand to inherit assets should discuss strategies to retain the assets as separate with an experienced Chandler divorce attorney.