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On inheritance, divorce and the effect of 'co-mingling'

Inheritance is an important financial topic, both emotionally and financially. An inheritance can provide you with a vast amount of wealth, interest in a company or significant and valuable asset. As such, people want to protect their inheritance and make sure that inheritance does not become part of the marital estate. When it comes to divorce, inheritance can make this wish, at the very least, a bit complicated.

In Illinois, we follow equitable distribution laws. Equitable division in a divorce does not mean each party will end up with 50% of the marital estate, but rather what is a "fair and equitable" division of the marital estate.

A crucial term in that paragraph is "marital estate." The marital estate is considered anything garnered during the marriage or, and more importantly when considering the topic of inheritance, any separate property that is "co-mingled" in marital property. Co-mingling can occur when a spouse takes separate property he or she owns and places it in a joint account or asset of some kind. This co-mingling makes the assets or funds marital property, and thus, subject to equitable distribution.

Inheritance can become co-mingled in a joint account, so it is important to manage that separate property properly when you obtain it, or when you purchase an asset in joint name. If you are going through a divorce and your inheritance was co-mingled, but you never intended for it to be marital property, you could appeal the inheritance's inclusion in the pool of marital property. However, you must be able to prove that you never intended the funds be part of the marital estate, a burden which can be difficult to establish.

Source: FindLaw, "Inheritance and Divorce," Accessed Dec. 7, 2016

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Goddard & Malmquist
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