Does a Spouse Get Increased Value in an Inherited Home in Divorce?

By Beverly Bird

There are few black-and-white answers when it comes to inherited property in divorce. An inherited asset starts out belonging solely to the spouse who received it, and it may remain that way – or it may not. It depends on what you do with it between the date you receive it and the time your marriage ends. If it appreciates in value, this is an additional factor the court must consider -- the question becomes why its value went up. Depending on the answer, the increase might be yours, or you might have to share it with your spouse.

There are few black-and-white answers when it comes to inherited property in divorce. An inherited asset starts out belonging solely to the spouse who received it, and it may remain that way – or it may not. It depends on what you do with it between the date you receive it and the time your marriage ends. If it appreciates in value, this is an additional factor the court must consider -- the question becomes why its value went up. Depending on the answer, the increase might be yours, or you might have to share it with your spouse.

Inherited Property

Inheritances are a spouse's separate property unless the bequest was specifically made to both of you. As your separate property, it's not subject to division in a divorce. The basic rule is that your spouse has no right to a share, but a lot of complicating factors come into play to muddy the legal waters, and the situation isn't always clearcut. If your ex argues that the home is not your separate property, you have the burden of proof in court to establish that she's wrong.

Divorce is never easy, but we can help. Learn More

Commingling and Transmutation

Separate property can become commingled with or changed into marital property, and if that happens, the court will divide it between you and your spouse if you divorce. This might happen for an obvious reason, such as if you retitle the property into joint names after you receive it. The courts in most states will assume you did so with the intention of converting the asset to marital property. Commingling and transmutation can also happen in far more subtle ways, and you might not even realize what you've done until it's too late. If you use marital money to pay for the home's upkeep, you've commingled a marital asset – your income – with your separate property. If you and your spouse live in your inherited home and make it your marital residence, your spouse may acquire a stake in its value.

Increases in Value

Even if you didn't commingle or transmute your inheritance, you might still have to share a portion of it in a divorce if it increases in value during the term of your marriage through appreciation. Some states treat the additional value as marital property. Generally, however, this only occurs if the appreciation was due to some action taken by one or both of you, such as if you added a sunroom – this is active appreciation. If it increased in value due to market conditions or inflation, this is passive appreciation, and you would generally not have to share the increased value if you kept the inherited property totally separate during your marriage.

Equitable Distribution vs. Community Property

If the court determines that the home is marital property – or even that a portion of it is – the next question becomes how the value is divided between you. This depends on whether you live in an equitable distribution state or a community property state. In community property states, you and your spouse equally own all marital assets, so they're typically divided down the middle in divorce. In equitable distribution states, judges have more discretion to divide assets unevenly. The court might find that your spouse contributed to the appreciation, but just a little, so the judge might award her a small portion of the increase in value, not 50 percent. Equitable distribution is based on the concept of fairness, and it would not be fair to give her a full half of the increase if her contributions were relatively insignificant. Even if the court finds that you commingled or transmuted your inheritance in some way, it's possible that the judge would not award your spouse a full half of the property's value in an equitable distribution state. A factor judges often consider is which spouse contributed to the acquisition of the asset. In cases of inherited property, this is obviously you, so it's possible you could receive the bulk of its value.

Divorce is never easy, but we can help. Learn More
New York Divorce Law Concerning Inheritances

References

Related articles

Is an Individual Bank Account Considered Joint Property in a Divorce?

Married couples often share bank accounts, with both spouses depositing and withdrawing money. When a divorce court judge looks at the money in those bank accounts, he must apply your state’s laws to decide whether the funds are joint property or one spouse’s separate property. The name on the bank account does not necessarily determine whether the account is joint or separate property.

Indiana Divorce Laws Regarding Inherited Real Estate

Indiana divorce law is somewhat unique in that it doesn't protect a spouse’s separately-owned property from distribution in a divorce -- including inheritances. It is an equitable distribution state, so all assets are divided between spouses in a way the judge deems fair. But that’s where Indiana’s similarity to other equitable distribution states ends because judges have the right to distribute virtually everything either spouse owns.

What Assets Are Protected From Divorce Settlements?

Divorce courts in all states recognize that some property is solely yours, immune from distribution in a divorce. If you must go to trial where a judge will divide marital property for you, the law protects these assets. If you and your spouse negotiate a settlement, you can usually do anything you like with your property and the court will approve your agreement. If you want to follow the letter of the law when you create your settlement agreement, several rules determine what constitutes separate, protected property.

Get Divorced Online

Related articles

Can a Wife Take Assets in a Divorce That Were Owned by the Husband Prior to the Marriage in Ohio?

Ohio courts can divide all types of property in your divorce -- real estate, household furnishings, vehicles and bank ...

How Can I Shelter Inheritance From a Marriage?

Statutory laws protect inheritances in all states. This means that if you receive an inheritance, the law declares that ...

Divorce & Equitable Distribution

If you and your spouse are facing divorce, you know the court is going to divide up the assets and debts you've ...

Spouse's Rights to Property Owned by the Other Spouse Prior to the Marriage

Identifying a spouse's separate or non-marital property is one of the more complicated aspects of divorce. While hard ...

Browse by category