Receiving an inheritance from a family member can significantly bolster your finances. But you may worry about what would happen to that money if you and your spouse were to divorce. Would it be subject to property division, or would you be able to keep it?
Generally, inheritances are considered excluded property in a divorce, but some circumstances could lead them to be viewed as family property. Understanding how to protect an inheritance from the risk of divorce in British Columbia can help you avoid these circumstances and protect your inherited funds.
Separate Inherited Funds From Marital Assets
The court may view your inheritance as “family property,” meaning it would be subject to property division if:
- It increased in value during the marriage (leading the court to split the increased amount).
- It has become muddled with the rest of your finances, creating confusion around whether the inheritance money still exists.
- You have purchased property with the inheritance.
One of the first steps you should take to avoid these scenarios is to keep your inherited money separate from the rest of your marital assets. If you and your spouse have joint bank accounts, keep your inheritance in a separate account that only you have access to. While you are welcome to use this money during your marriage, avoid paying for expenses that pertain to both of you.
Creating a clear distinction between your inheritance and your marital assets will make it easier for the court to view these funds as separate property in a divorce.
Set Up a Trust
Placing your inherited funds in a trust offers an extra layer of protection. This lets you retain full control over how you handle and distribute assets after you receive them.
Essentially, you would contribute your inherited funds to the trust, then designate yourself as the beneficiary. This allows you to retain access to the funds.
There are several types of asset protection trusts that may help you protect your inheritance from the risk of divorce. Talk to a lawyer about the right type of trust for your situation.
Create a Marital Contract
A marriage contract may include a prenuptial agreement, post-nuptial agreement, separation agreement, or any other contract that clarifies each spouse’s rights in the marriage. You can create a marital contract that distinctly separates your inherited funds from your shared assets, preventing them from becoming commingled during the marriage.
Many couples create pre-marital agreements specifying that in the event of divorce, each spouse would walk away with what they originally brought into the marriage. If you receive an inheritance after you are already married, you can update your marital contract to reflect this change.
It’s important to draft your marriage contract with the help of an experienced lawyer to ensure that it holds up in court and accurately reflects your wishes.
Work With an Experienced Family Lawyer To Protect Your Inheritance
If you want to protect an inheritance from the risk of divorce, working with an experienced family lawyer can help you avoid pitfalls in this process and adequately safeguard your assets. They can explain what would likely happen to the inheritance if you did not have any protections in place. Then, they can create a legal plan that reflects your circumstances and wishes and help you implement it.
At Pier Law & Mediation, our family lawyers have over 15 years of experience representing clients across British Columbia. We provide fully tailored legal help across a range of family law matters, including marital contracts, divorce, child custody, and more.
Call 604-560-8285 or fill out our online form to schedule a consultation and learn how to protect an inheritance from the risk of divorce in British Columbia.
