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When does your inheritance belong to your spouse? Print E-mail

QUESTION: WHEN IS YOUR INHERITANCE NOT YOURS?

ANSWER: WHEN YOU DON’T HAVE A PRENUPTIAL AGREEMENT

Did your grandparents leave you some property? Are you getting an allowance from a deceased aunt’s trust fund? When your ailing mother dies will you receive part of her assets as an inheritance? And if you’re getting a divorce, could you lose those gifts? In Michigan, inheritances and trust benefits are property over which Judges have power to divide during divorces.

During a divorce a Judge decides what property is “owned separately by a party” and what is “marital property.” The marital property will be split roughly 50/50. Separate property will not be split. Still, separate property could be shared in a few narrow circumstances discussed below.

In deciding what is marital vs. separate property the Judge considers how, when, why and under what circumstances the property was received, and how it is held now. Is it real estate that wife’s aunt Martha gave her? Pretty good proof it was intended just for wife. But did wife put it in her and her husband’s name? Pretty good proof wife gave husband a joint interest in it. Or did wife and husband borrow money and wife gave the property as collateral for the borrowed money? Could be proof that wife wants husband to have joint interest in it since he’s on the hook for the loan with her. Is it an account in only wife’s name, never touched except to pay for annual family vacations? Well, it’s hers, but she shares it regularly. Tough question.

The Judge also considers what each spouse “contributed to the property” and how much each “uses” it. So Aunt Martha’s cottage is now just in wife’s name, but husband is the only one in the family who uses the cottage during deer hunting season. He repairs it. He mows there. He fixes the plumbing. He pays the taxes on it. Pretty good proof that wife is good with husband co-owning the property.

In some instances husband never sees wife’s inherited property, yet only he has any income. He pays to improve the inherited property. But for husband paying the tax bill, the property would have been lost in a tax sale. The judge is bound to do equity – meaning to be fair – and will award husband half, or at least a significant share of the property.

In Michigan the poorer divorcing spouse might also obtain some of the other spouse’s totally separate property or inheritance if there is just not enough marital property to provide for the poorer spouse after the divorce. The decision is rarely easy, not black and white. But there is a risk of losing your inheritance in a divorce.

The rules for dividing inheritances and separate property are the big reasons for (a) prenuptial agreements and (b) experienced divorce lawyers. ‘Prenups’ lay down the rules the parties will use in dividing their property when they die, or divorce. Makes good sense to use one – especially in second-marriage families where both parties have children they want to leave their own stuff to.

What about making a property split agreement when you receive your inheritance, AFTER you’re married? Mid-marriage agreements can stand up in court only if they meet several requirements, including the need for some new and separate “consideration”. The courts do not approve of so-called ‘happy’ spouses making agreements that favor one of them, only to find the favored party filing for divorce soon afterward – who then takes the money and runs. So the courts are veeeeery skeptical of lopsided mid-marriage agreements. You get to keep your inheritance through a mid-marriage agreement, but only in exchange for something new you give in return.

So know your rights. But get it right. Get an experienced attorney.

Jeanne L. Jerow. Experienced divorce attorney. Practicing in Big Rapids, Stanton, Grand Rapids and Newaygo.
 

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