If you are married and you inherit property in North Carolina, that property is separate property. That is, it is not included in the marital estate when the marital assets are divided at divorce. Here are five things to know about inherited property:
- If you keep it separate, it stays separate. Inherited funds that remain in an account in the heir’s name (or inherited real property) will stay separate property and will not be included in the marital estate for the purposes of the division of assets.
- If you use a portion of your inherited funds to buy real property, or if you put some of the funds into another type of account, make sure the account or the real property is in your name only. This will maintain the separate character of the original inherited property.
- If you put inherited funds into a joint account with your spouse, you have made a gift of those funds to your marriage, meaning that the amount that has been commingled has become marital property, and is subject to valuation and division at divorce.
- If you inherit real property and you later decide to sell it and then use the proceeds to buy real property which you put in both spouses’ names, that new property is marital property, and subject to valuation and division at divorce, even though the funds used for it were separate property.
- If you use a portion of inherited funds to pay off marital debt, you have made a gift to the marriage of that portion of the inherited funds. In a divorce, there is no way to “claw back” this amount; it is water under the bridge.
The best course of action with inherited property is to be sure to maintain it separately in order to protect it from any marital claims.