Inheritance - separate or co-mingled
- Thread starter OddGuy
- Start date
That may not be true in California, a community property state. When my sister divorced, her commingling of inheritance funds into their joint account meant the husband was entitled to half the remaining assets, regardless of the inheritance being disbursed solely to her or any paper trail she provided.
She was informed she would have had to put the money in an account only in her name, with the understanding that any money she used for shared purposes would be considered a 'joint asset'. IOW, if she paid 100% for a car, but the title listed both their names, the car was a joint asset and she only owned 50% of its worth.
Telly
Thinks s/he gets paid by the post
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- Feb 22, 2003
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We live in a Community Property state. Some years ago, I was notified that I was about to receive a 5-figure inheritance from a more-distant relative. Totally unexpected! I decided that I really wanted to keep it as Separate Property, and have it TOD to our kids upon my demise. And I instructed them in advance how to receive it, and how to maintain Separate Property status for themselves.
At least in our state, the dangers of co-mingling and losing Separate Property status are deeper than the obvious. Any "Income" derived from Separate Property is deemed shared property. So if the $$ are invested in a mutual fund, for example, any interest or dividends from the fund are "Income", and therefore must be kept separate from the Separate Property account. I invested the inheritance in a mutual fund (taxable), with dividends taken as cash. The cash, as it is shared property, is for us to use together. The fund's principle, plus reinvested capital gains, retain their Separate Property status. I felt that this was equitable. DW agreed, and did the same later when she received a similar inheritance.
If one wanted to maximize the growth of the Separate Property over time, it could have been invested in a growth fund, where dividends would be minimal to non-existent, so little growth leakage into Community Property.
Inheriting a house and trying to keep it as Separate Property has many landmines to avoid, as any Community Property used to maintain it causes co-mingling. Any income (rent) derived from it, is shared, not Separate, and cannot be used as Separate Property, nor be used to maintain, improve or pay any taxes, etc. for the house. Receiving an inheritance in cash, or in a mutual fund, is simple to handle in comparison!
At least in our state, the dangers of co-mingling and losing Separate Property status are deeper than the obvious. Any "Income" derived from Separate Property is deemed shared property. So if the $$ are invested in a mutual fund, for example, any interest or dividends from the fund are "Income", and therefore must be kept separate from the Separate Property account. I invested the inheritance in a mutual fund (taxable), with dividends taken as cash. The cash, as it is shared property, is for us to use together. The fund's principle, plus reinvested capital gains, retain their Separate Property status. I felt that this was equitable. DW agreed, and did the same later when she received a similar inheritance.
If one wanted to maximize the growth of the Separate Property over time, it could have been invested in a growth fund, where dividends would be minimal to non-existent, so little growth leakage into Community Property.
Inheriting a house and trying to keep it as Separate Property has many landmines to avoid, as any Community Property used to maintain it causes co-mingling. Any income (rent) derived from it, is shared, not Separate, and cannot be used as Separate Property, nor be used to maintain, improve or pay any taxes, etc. for the house. Receiving an inheritance in cash, or in a mutual fund, is simple to handle in comparison!
PandaBear
Recycles dryer sheets
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- Mar 11, 2014
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- 313
I received a relatively small amount (about 30k) back in the mid 90’s, from my grandma. It was kept separate and dh had no issue with it. Along the way some of he interest was spent to fund a family vacation or two as well as sending dh on a very special 40th birthday trip (could never had afforded to splurge on it otherwise). Dh inherited a much larger amount about 7 years ago (about 200k) and he kept it separate as well, although we pulled some out to pay for the last of the college expense. Both accounts are TOD to each other.
But then, we both have separate savings and checking accounts (although we both can sign on each other’s). We both have very different style of money management and use separate accounts to play to our strengths. I don’t think separate accounts is a reflection of anything, it’s just what we did.
But then, we both have separate savings and checking accounts (although we both can sign on each other’s). We both have very different style of money management and use separate accounts to play to our strengths. I don’t think separate accounts is a reflection of anything, it’s just what we did.
Inherited IRA's went to a financial planner to manage. While non-IRA went to my trading acct.
But, all will be treated as the same when spent.
For us things are separate with a co-mingled acct. for household expenses. We married later in life with established financial affairs and opposing spending patterns. Each other is beneficiary to the other, or the kids.
A lot of virtue signaling on this one.
But, all will be treated as the same when spent.
For us things are separate with a co-mingled acct. for household expenses. We married later in life with established financial affairs and opposing spending patterns. Each other is beneficiary to the other, or the kids.
A lot of virtue signaling on this one.
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Congratulations. We are only approaching 30 years but hope to make it to the half-century mark one day. Sometimes to me it seems like it is all 'her money' but she is quite generous!
There is no “our” retirement money, just mine & my spouse’s, completely separate. We are each primary beneficiaries of each other’s accounts. Then spouse’s kids are secondary on spouse’s accounts, and my beneficiaries secondary on my accounts. We are each effectively JTWROS on the house and RV titles. We each have one car. I get the dog. Simple
