Divorce proceedings can be emotionally taxing and legally complex, especially when unexpected financial matters arise during the process. One situation that may cause confusion is receiving an inheritance while a divorce is pending. If you or your spouse has received an inheritance during the divorce proceedings, it’s important to understand how it may, or may not, impact the division of property in Illinois.
Marital vs. Non-Marital Property
Illinois is an equitable distribution state, meaning that marital property is divided fairly between the spouses, though not necessarily equally. However, not all assets are subject to division. The Illinois Marriage and Dissolution of Marriage Act (750 ILCS 5/503) distinguishes between marital and non-marital property.
Generally, marital property includes any assets acquired by either spouse after the date of the marriage and before the date of separation. This could include income, retirement accounts, real estate, and other valuables. On the other hand, non-marital property includes:
- Property acquired by gift, legacy, or descent (such as an inheritance),
- Property acquired in exchange for property acquired before the marriage,
- Property excluded by valid agreement (e.g., a prenuptial or postnuptial agreement),
- Property acquired after a judgment of legal separation,
- And property acquired before the marriage.
So, if you were to receive an inheritance during a divorce, it would typically be considered non-marital property, as long as it’s kept separate and is not commingled with marital assets.
Commingling: When Inheritance Becomes Marital
Even though inheritances are generally protected as non-marital property, how you handle that inheritance after receiving it can change its classification. The legal term for this is commingling, which refers to mixing non-marital property with marital property to the point where it becomes difficult to separate them.
Here are some examples of commingling:
- Depositing inherited funds into a joint bank account used for daily expenses.
- Using inheritance money to pay down a mortgage on a jointly owned home.
- Titling inherited property (like real estate) jointly with your spouse.
- Making improvements to a marital property using funds from an inheritance.
If the court determines that the inherited assets were commingled, they may be reclassified as marital property, making them subject to division during the divorce. This reclassification can significantly impact your financial outcome.
Documentation is Key
If you’ve received an inheritance during your divorce, it’s important to keep clear and consistent documentation. Keep the funds in a separate account in your name only. Don’t use the money for shared expenses and avoid making any joint investments or purchases with that money.
Supporting documents may include:
- A copy of the will or trust that specifies the inheritance.
- Records of where the funds were deposited.
- Any correspondence related to the distribution of the inheritance.
This paper trail can help demonstrate that the inheritance was intended for you alone and that you took steps to preserve its non-marital nature.
Timing Matters
Another point of consideration is when the inheritance is received. If the inheritance is received after the divorce is finalized, it is not subject to division. However, if the inheritance is received before or during the divorce process, the court may examine it more closely to determine its classification and potential impact on spousal maintenance or asset division.
In some cases, even if the inheritance is deemed non-marital property, the court may still consider it when deciding other financial matters. For instance, if one spouse receives a substantial inheritance, the court may decide to adjust the division of marital assets or spousal maintenance accordingly. This is not the same as dividing the inheritance, it’s more about balancing the overall financial picture.
Impact on Spousal Maintenance and Child Support
While an inheritance may not be considered marital property, it can still impact financial obligations, such as spousal maintenance (alimony) or child support.
For spousal maintenance, Illinois courts consider the income and financial resources of both spouses. If you receive an inheritance, the court may determine that you have less need for spousal support or have a greater ability to pay spousal support
For child support, courts typically consider a parent’s income. However, in some cases, they may also consider non-income sources of support, especially if an inheritance generates significant passive income or substantially improves a parent’s financial position.
Protecting Your Inheritance
If you’re concerned about protecting an inheritance before or during divorce, there are several proactive steps you can take:
- Consider a prenuptial or postnuptial agreement. These contracts can define what is, and isn’t, considered marital property.
- Keep inherited funds in a separate account. Avoid combining them with joint assets.
- Avoid using inherited funds for shared expenses or property. Doing so can risk reclassifying the funds as marital.
- Talk to your attorney. If you anticipate receiving an inheritance or have already received one, a knowledgeable family law attorney can help you navigate how to handle it during divorce proceedings.
Divorce is rarely straightforward, and financial changes that occur during the process can further complicate matters. If you’ve received or expect to receive an inheritance during your divorce, understanding how Illinois law treats these assets is critical. While inheritances are typically protected as non-marital property, how you handle and manage those funds can significantly affect your divorce outcome.
At Sterk Family Law Group, we help clients navigate these sensitive financial issues with transparency and care. Whether you’re managing an inheritance, protecting your assets, or seeking a fair resolution, our team is here to advocate for your best interests every step of the way.