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How can you protect your inheritance in case of divorce?

When people go into a marriage with a large inheritance or receive one during the marriage, many use it for the good of the couple and their family. They may buy a house, pay off debt or put it into an investment or savings account.

If the marriage ends, they often assume that they will receive the assets from that inheritance. However, once the funds have been comingled with marital assets, they are no longer separate assets that they're entitled to in the divorce.

Comingling happens in a number of ways. For example:

-- If you deposit the funds in a joint account that has your spouse's name on it

-- If you use the inheritance to purchase or renovate a home that you both own

-- If the inheritance involves a property that you spend joint funds to renovate or upgrade

The best way to protect an inheritance is with a prenuptial agreement. A prenup can designate not just that you will get an inheritance you already have when you get married, but stipulate that any inheritance you receive in the future will be yours if you divorce.

However, if you want to ensure that you'll come out of the marriage with the assets you've inherited, whether you have a prenup or not, it's best to keep those assets separate from marital assets. Put the funds in an account that's only in your name, and don't add any marital assets to it.

State laws vary regarding the distribution of inheritances in divorce. Judges can also use their own discretion. You can contend that your spouse never touched the funds and that they were meant only for you. However, if they've been comingled in any way with marital assets, that argument may not hold up.

For advice on how to handle inherited assets to help ensure that you don't lose them in a divorce, it's best to seek both legal and financial guidance.

Source: Findlaw, "Inheritance and Divorce," accessed Dec. 13, 2016

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