How Inheritance is Handled in Divorce

When couples decide to divorce, dividing property can quickly become one of the most contested and complex aspects of the legal process. This is especially true when one spouse has received a significant inheritance. Questions surrounding how inheritance is handled in divorce often arise early in the proceedings, and in Texas, the answer is not always simple. While inheritances are generally treated as separate property, there are many scenarios in which they become entangled with community assets, making their classification and division far more complicated. If you or your spouse has received an inheritance and you are considering divorce, it is essential to understand how inheritance is handled in divorce and to take swift action to protect your rights. At McClure Law Group, our experienced Dallas divorce attorneys help clients navigate complex legal issues with the strategic insight and attention to detail that high-net-worth property division demands, and if we represent you, we will fight to help you protect your interests. 

Texas is a community property state, meaning that most property acquired by either spouse during the marriage is considered jointly owned. However, an important exception applies to inherited property. Under the Texas Family Code, assets acquired by gift, devise, or descent are presumed to be separate property, even if they are received during the marriage. This means that, as a general rule, inheritance belongs solely to the spouse who received it and is not subject to division in the event of divorce.

Still, determining how inheritance is handled in divorce is not always straightforward. If inherited assets were mixed or “commingled” with community property, such as by depositing inherited funds into a joint bank account or using inheritance money to make improvements to a jointly owned home, the distinction between separate and community property can become blurred. In such cases, the spouse claiming the inheritance as separate property bears the burden of proving its separate character through a process called tracing. This often requires detailed financial records and the assistance of forensic accountants or other financial experts. Without clear documentation, the court may presume the property is community in nature and divide it accordingly.

It is also important to note that the increase in value of separate property may or may not be subject to division depending on how the increase occurred. For instance, passive appreciation on a separately inherited investment account typically remains separate, but if a spouse actively managed the account using community time or funds, the increase may be subject to a reimbursement claim. The rules governing how inheritance is handled in divorce are nuanced and highly fact-specific, which is why working with an attorney experienced in complex property issues is essential.

Even when an inheritance is clearly classified as separate property, the divorce court may still consider how community assets were used in connection with that property. This is where the concept of reimbursement comes into play. If community funds or time were used to preserve, enhance, or maintain inherited property, the non-owning spouse may have a claim for reimbursement. This commonly occurs when an inherited property, such as a home or business, is improved or sustained using marital income. For example, if one spouse inherited a house but both spouses contributed to renovations, mortgage payments, or property taxes using community funds, the other spouse may be entitled to reimbursement even though the home itself is not subject to division.

The Texas Family Code allows courts to recognize and enforce reimbursement claims to achieve a just and right division of the marital estate. However, courts are not required to divide property equally, and judges have broad discretion to consider various equitable factors when making property division decisions. These factors may include the financial resources of each party, the duration of the marriage, the contributions of each spouse to the acquisition of property, and any wrongdoing such as fraud or waste of assets.

It is also worth noting that prenuptial and postnuptial agreements can significantly affect how inheritance is handled in divorce. Spouses may agree in advance that inherited property will remain separate or that any income derived from such property will also be treated as separate. In the absence of such agreements, courts must rely on statutory guidelines and evidence presented by the parties to determine the appropriate classification and treatment of inherited assets.

The question of how inheritance is handled in divorce can have a major impact on your financial future. Whether you are seeking to preserve an inheritance as separate property or ensure that you receive your fair share of contributions made to inherited assets during the marriage, you need skilled legal representation to protect your interests. The knowledgeable Dallas divorce attorneys at McClure Law Group have extensive experience helping clients navigate complex dissolution proceedings, and if you engage our services, we will gather the evidence needed to help you maintain financial security. We serve individuals and families throughout Dallas, Fort Worth, Rockwall, Frisco, McKinney, Irving, Richardson, Garland, and other communities across Dallas, Collin, Denton, Rockwall, Tarrant, and Grayson Counties. Our main office is located in Dallas, and we also meet with clients by appointment at our Collin County office in Plano. If you are facing a divorce and need clarity on how inheritance may be treated, contact McClure Law Group today at 214.692.8200 or complete our online form to schedule a confidential consultation.