Couples may get married because they fall in love, but it is important to remember that marriage is also a business deal. It is common for married couples to comingle finances and assets. Although this comingling is beneficial during the marriage, splitting apart property and money in divorce can be a logistical nightmare.
Illinois is an “equitable distribution” state. This means that in divorce, debts, assets and property are to be divided equitably (which doesn’t always mean splitting things in half). So what can you do if you have received or expect to receive a family inheritance that was intended only for you? Can you keep this inheritance from being divided in divorce?
The short answer to this question is “yes,” but it takes some careful planning. Perhaps the most straightforward way to keep your inherited money or property separate is to draft a prenuptial agreement. If you will be getting married in the future and expect that you will be coming into an inheritance, you could include a provision in your prenuptial agreement specifying than any inheritances received by either spouse should be retained only by that spouse in the event of a divorce.
Even if you have a prenuptial agreement in place (and especially if you don’t), it is important to keep records and documentation and to avoid using your inheritance in any way that could turn it into joint marital property. Inherited money, for instance, should be kept in a separate, private bank account if you don’t intend to share it with your spouse.
If your family bequeaths heirloom property, a family business or other assets you intend to keep separate, documentation can really help. Still-living parents who pass on property to their children can include a letter specifying that the property or funds were intended solely for the son or daughter and not his/her spouse. Copies of gift-tax returns can also be a way to document who rightfully owns the property.
Very few people like to keep documentation or go through the hassle of setting up private accounts in order to protect their inheritances. This is especially true during periods when you assume that you and your spouse will remain together forever. But if keeping an inheritance separate is important to you, a little work and planning now could save you a lot of frustration (and potential heartache) later on.
Source: The Wall Street Journal, “How to Keep Your Inheritance in a Divorce,” Neil Parmar, Nov. 9, 2014