Illinois is an equitable distribution state. This term is a part of divorce law where the court determines the distribution of assets based on equity; however, this doesn’t necessarily mean that all assets acquired during the marriage are divided equally between the parties. In some cases, assets not considered marital property may not be divided equally. Sometimes an inheritance is not considered marital property since it was acquired by gift, legacy, or descent. Inherited money, property, and real property usually fall into this category.
Marital property versus non-marital property
Marital property is that property obtained during the time the two parties were married. This property may include a home, vehicles, savings, or retirement plans. Inherited assets that are communally used in the marriage may be considered marital property if they are lived in by the married couple, used by the married couple (such as a boat or car), or spent on marital expenses or kept in a joint account.
Inheritance could also classify as marital property. For example, you could inherit money and deposit it in a joint bank account with your spouse. If you use those funds to pay household expenses or to purchase joint assets such as a home, they could be considered marital property.
Inheritance, either before or after marriage, can be a complex issue during a divorce. The court decides how to split these assets by determining how the inheritance has been used. If, like the prior example, the funds are held in a separate account, and the funds are used to purchase a home, the court may award the non-inheriting spouse a portion of the increased value of the home that was purchased.
Separate property or non-marital property applies to assets that are held completely separate from marital assets.
How to keep inheritance from becoming marital assets
The ideal way to keep an inheritance separate, or non-marital property, is to sign a prenuptial or postnuptial agreement that excludes the inheritance from being considered marital property. In lieu of either of those agreements, the inheriting spouse should keep the inheritance separate from joint accounts, joint deeds, or in any way co-mingled. It is imperative to keep precise and detailed records of how the inherited funds are used or saved.