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How Inheritances Impact Alimony Payments

splitting inheritance in a divorce

Inherited wealth is usually given to one individual with the intention that it stays with that individual. This can be accomplished through a prenuptial agreement or a family trust, keeping the inherited monies out of a joint account and, therefore, away from the soon-to-be ex-spouse.

If a divorcing couple has assets or is expected an inheritance, a family law professional is your best ally in crafting an agreement to avoid negatively affecting your financial goals. 

Nonmarital Assets

Inherited monies are generally considered a nonmarital asset, therefore not subject to division.  However, if the monies are converted to a marital asset, they could be divided, whether the transfer was intentional or unintentional.

Through an interspousal gift, a nonmarital asset can be converted to a marital asset, therefore subject to equitable distribution. If the gift involves real estate, the title to the property is not a factor in determining an interspousal contribution because Florida is not a title theory state.

Marital Assets

Transmutation describes a property converted from one’s separate property into a marital asset. For example, if one of the spouses owned the property before the marriage, but it is titled in both partners’ names after marriage, it’s now a marital asset, therefore subject to division.

Even if a premarital agreement is in place, couples who do not manage their affairs with the help of a family law specialist who understands Florida family law may risk losing inherited wealth to the ex-spouse. 

The descendants can enter into a prenuptial (prenup) or postnuptial (postnup) agreement to manage the inherited wealth, though the couple may not be willing to have their finances micromanaged. 

Couples may also want to consider creating an irrevocable trust to hold inherited wealth, especially if it is to be passed on to their children.  

Alimony

Generally, in the absence of a marital agreement, the wealthier spouse may have to pay alimony to the other depending on their incomes and prospects for earning.  

Alimony may be awarded to the lesser earner depending on the length of the marriage, the standard of living, contribution, and debts each individual contributed to the marriage. Is there a need for ongoing spousal support and is there an ability to pay for such support?

The prediction that inherited wealth is forthcoming is not a factor in determining alimony. While you may have good reason to believe that a large inheritance is coming in the future, you cannot count on it for sure until the assets have been distributed to the heir/beneficiary.

If one spouse receives alimony from the other and one of the spouses inherits a substantial sum of money at a later date, alimony may be subject to revision, either up or down, even if it is permanent alimony. 

On a related note, alimony may be affected by the increase in value of other nonmarital assets as well. Particularly if either party’s investment helped that asset grow or if marital funds were used to maintain the investment.

Commingling an Inheritance

Of course, there are few black-and-white answers when it comes to divorce, and that remains true when it comes to inheritances. An inheritance may be considered marital property if it is commingled with other marital assets during the marriage. This just means that the asset was combined with marital property and is consequently indistinguishable from marital property.

This may play out in several different ways, depending on the type of inheritance you receive. For example, imagine a spouse that receives $100,000 from a family member upon their passing. They do not put it in a separate account under their own name and instead just deposit it into the marital bank account where both spouses can access it.

Over the next few years, that account is used to pay bills, take vacations, and otherwise benefit the marriage as a whole. When the couple splits, the courts may determine that the inheritance was commingled since it was kept with marital funds and used by both parties.

Another scenario: imagine a person who receives a vacation home for their inheritance. Although it is only in their name, they have family vacations there with their spouse and children.

When they aren’t using it, they rent it out and use the rental income to increase the family’s overall income. When something breaks, they tap into their shared bank account to fund repairs or upgrades. At this point, marital funds have been used to improve the property and income from the asset has been used to benefit the marriage. The vacation home may be commingled and viewed as marital property.

Your Florida Family Law Professional,

Divorce can be complicated, especially if there is wealth to consider or a future inheritance. Saving money by not hiring a lawyer can be a mistake that costs you dearly.

Crystal Collins Spencer, Attorney at Law has over 30 years of experience representing both petitioners and respondents in divorce cases. There are many nuances to divorce law that may leave you vulnerable. Let her experience in these complex legal matters work for you. Contact her Pensacola office today at (850) 795-4910 or send us an online message to set up a personalized consultation to discuss your case.

Sources:

Fl Bar
https://www.floridabar.org/the-florida-bar-journal/protecting-an-inheritance-in-the-event-of-divorce/#:~:text=In%20addition%20to%20the%20impact,mostly%20on%20that%20spouse’s%20income.

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