When Does an Inheritance Become Marital Property in Minnesota?

when does an inheritance become marital property

Receiving an inheritance during your marriage can raise questions about whether it will be considered separate or marital property in the event of a Minnesota divorce. While inheritances are generally deemed separate property belonging only to the inheriting spouse, there are some exceptions under Minnesota law where inheritance can become marital property subject to division.

Understanding when and how an inheritance can become marital property is crucial if you want to protect your inheritance through a divorce. This article provides an overview of separate vs. marital property in Minnesota, explains when an inheritance may be considered marital property, and offers tips on how to keep your inheritance protected as separate property.

Separate vs. Marital Property in Minnesota

Minnesota is not a community property state. This means all property attained by either spouse during the marriage is not automatically considered joint marital property. Instead, Minnesota utilizes the concept of equitable distribution.

Upon divorce in Minnesota, marital property is divided equitably between the spouses. This does not necessarily represent an equal 50/50 split. The court will divide assets equitably based on each spouse’s contributions during the marriage and other factors.

Marital property generally includes:

  • Assets and debts attained during the marriage by either spouse
  • Income earned by either spouse during the marriage
  • The rise in the value of non-marital property during the marriage is often referred to as active appreciation.
  • Property acquired by either spouse after the valuation date but before the divorce decree

Separate property includes:

  • Assets owned by either spouse before the marriage.
  • Inheritances received by either spouse from a third party.
  • Gifts received by one spouse during the marriage.
  • Personal injury awards acquired by one spouse during the marriage.
  • Increase in value of non-marital property or passive appreciation.
  • Property excluded by a legally valid prenuptial or postnuptial agreement.

So, under Minnesota law, any inheritance received by one spouse is generally considered their separate, individual property, not subject to division in a divorce. But, there are some exceptions where an inheritance can become marital property.

When Can an Inheritance Become Marital Property in Minnesota?

While inheritances are typically separate property in Minnesota, there are a few ways an inheritance can become marital property subject to equitable division:

Inheritance Is Commingled with Marital Assets

Commingling occurs when separate property is mixed with marital property, making it difficult to trace which spouse owns which assets.

For example, if one spouse deposits an inheritance check into the couple’s joint checking account, those inherited funds are commingled. If the inheriting spouse cannot definitively trace the inherited money within the account, the inheritance may be deemed marital property.

However, commingling alone does not automatically make an inheritance of marital property. As long as the inherited funds can be traced and identified, the inheritance remains separate property. Tracing can be done through records like bank statements. But sloppy commingling can make tracing difficult or impossible.

Inheriting Spouse Transmutes Separate Property into Marital Property

In Minnesota, spouses can change the status of an asset from separate property to marital property through “transmutation.”

Transmutation requires a written agreement signed by the inheriting spouse with the intent to gift their separate property inheritance to the marital estate.

For example, if a spouse signs an agreement stating they want to transfer their inherited cash assets into a joint investment account owned by both spouses, this could transmute the inheritance into marital property.

Inheritance Is Gifted to Both Spouses

If the inheriting spouse makes an intentional gift of all or part of the inheritance to the other spouse, this converts the inherited property into marital property.

A gift could include adding the other spouse’s name to the title for inherited real estate or assets. Or directly transferring a portion of inherited funds into an account jointly owned with the spouse.

In this situation, clear evidence must exist to demonstrate the inheriting spouse’s donative intent to gift the inheritance to the marital estate.

How to Protect Your Inheritance in a Minnesota Divorce

If you have received or expect to receive an inheritance during your marriage, take steps to keep it protected as your separate property if divorce occurs. Here are some tips:

  • Keep the inherited assets completely separate from jointly owned marital property. Do not commingle funds by depositing them into joint accounts.
  • If funds are commingled, be sure to keep detailed records tracing the inherited assets. Retain documentation like bank records showing inherited deposits and withdrawals.
  • Do not transmute the inheritance into marital property. Do not sign any written agreement stating intent to gift the inheritance to the marital estate.
  • Avoid gifting any portion of the inheritance to your spouse or adding your spouse’s name to inherited property titles. Make sure the inheritance stays solely in your name.
  • Consult a Minneapolis divorce attorney if you commingled assets or if your spouse disputes the inheritance as separate property. A family law attorney can help protect your inheritance through equitable distribution.
  • Consider a postnuptial agreement if you recently received a large inheritance. This can spell out in writing that the inheritance remains your separate property, not subject to division.

Get Legal Help Protecting Your Inheritance in a Divorce

Receiving an inheritance can provide financial security and stability, especially when going through an emotional and expensive divorce. Don’t take chances with protecting your inheritance during the divorce process in Minnesota.

Martine Law has extensive experience with inheritance division and complex asset cases in Minnesota. We work aggressively to value assets correctly and argue inheritances and gifted property should remain separate.

Schedule a free case review with our team to discuss your situation. We provide compassionate counsel and strong legal advocacy to help you move forward with your best interests protected.

Author Bio

Xavier Martine

Xavier Martine is the Founder of Martine Law, a Minnesota criminal defense and family law firm. Serving clients in Minneapolis, MN, and surrounding areas, he is dedicated to representing clients in a wide range of criminal matters, including DWIs, drug charges, misdemeanors, domestic violence, and other criminal charges. He also represents clients in family law matters, including divorce, child support, and child custody.

Xavier received his Juris Doctor from the Mitchell Hamline School of Law and is a member of the Minnesota State Bar Association. He has received numerous accolades for his work, including being named among the “Top 10 Criminal Defense Attorneys Under 40 in Minnesota” in 2021 by The National Academy of Criminal Defense Attorneys. He was also named the “Best DUI Lawyer in Minneapolis” award in 2023 by Expertise.com and a “Rising Star” in 2023 by SuperLawyers.

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