How to Handle Inheritance in a California Divorce?
Got an inheritance and worried your spouse might get half of it in a divorce? In California, inheritance is usually considered separate property. That means it generally belongs to the person who received it, even if it came during the marriage. But there are important exceptions to know. Understanding how separate property differs from community property can save you from unexpected surprises during a divorce.
Separate Property vs Community Property
In California, things you inherit are typically treated as separate property. Separate property remains yours alone. Community property, on the other hand, is owned equally by both spouses and is subject to division in a divorce.
Why this matters: if your inheritance stays separate, your spouse normally has no claim to it. If it becomes commingled with marital assets, it can lose that protection.
How an Inheritance Can Lose Its Separate Status
Commingling is the main risk. Once inherited funds are mixed with community assets, tracing the original source becomes necessary to preserve separate ownership. Common ways commingling happens include:
- Depositing inheritance into a joint bank account
- Using inherited money to pay household bills or shared expenses
- Spending inheritance on improvements to the marital home
- Transferring inherited assets into accounts or property titled in both spouses names
Why home improvements matter
Using inheritance to upgrade or pay down the mortgage on the family home can convert some or all of that inheritance into community property. The community may acquire an interest in the increased value of the home or in mortgage equity paid with inherited funds.
Real Case Example: Tracing a $100,000 Inheritance
We helped a client who inherited $100,000 and used part of it for home improvements. Because the funds were mixed with marital resources, we traced where the money went and documented what portion remained separate.
What tracing achieved in this case:
- Identified the amount that was still separate and preserved that portion
- Determined which expenditures effectively converted part of the inheritance into community property
- Included clear documentation in the divorce paperwork so the judgment was court approved and dispute free
How to Protect an Inheritance in a California Divorce
Protecting inherited assets takes planning and documentation. Here are practical steps you can take right now:
- Keep inherited funds separate — open and use a single-owner account in your name for inherited money.
- Document the source — keep wills, beneficiary designations, probate documents, and any letters that show the funds were an inheritance.
- Avoid commingling — do not deposit inherited funds into joint accounts or use them for joint expenses unless you intend them to become community property.
- Trace expenditures — if some inherited funds were used for marital property, keep receipts, bank statements, canceled checks, and other records to show how the money was spent.
- Consider written agreements — agreements that clarify whether certain funds remain separate can prevent disputes later.
- Get your judgment court approved — ensure divorce paperwork and any property division is properly documented and approved by the court to reduce future challenges.
Key Documents to Keep
- Bank statements showing deposits of the inheritance
- Receipts and invoices for expenditures paid with the inherited funds
- Probate orders or beneficiary statements
- Written communications indicating the money was intended as an inheritance
- Any agreements or disclosures signed during the marriage
Final Thoughts and Next Steps
Do not leave inherited assets to chance. If you have received an inheritance and want to protect what is yours, take action now. Proper documentation and timely tracing can preserve separate property rights and prevent surprises during a divorce.
We help identify what is separate versus community property, trace funds when needed, and prepare court approved divorce paperwork that protects your inheritance and reduces disputes. For a free consultation, visit Divorce661.com and schedule a call to discuss your situation and next steps.
