How to Protect Inheritance in a Divorce

If you enter a marriage with prior wealth from an inheritance, that money typically is considered separate property. However, if you deposited the money in a joint account, it becomes marital property to be divided. The easiest way to protect that money is by entering a prenuptial agreement before marriage.^{[1]XResearch source} Absent a prenup, you can negotiate a postnuptial agreement with your spouse that will safeguard any inheritance you received, either before or during the marriage. If it's an inheritance set aside from your children that you want to protect, you can do so by creating a trust in their names.^{[2]XResearch source}

Method 1

Method 1 of 3:

Starting with a Prenuptial Agreement

1
Review the property laws in your state. In one sense, you and your partner already have a prenuptial agreement. By default, the laws of your state determine how your property will be divided if you divorce.^{[3]XResearch source}
- You can search online to learn about marital property in your state (just search the terms "marital property" and the name of your state), or you can talk to an attorney who specializes in family law and prenuptial agreements.
- A prenuptial agreement may become necessary if either of you are dissatisfied with your state law concerning property division, or would prefer a different outcome in the event of a divorce.
2
Disclose your income and assets to your partner. For a prenuptial agreement to be valid, both partners must make a full disclosure of all income and assets available to them. This may mean getting real property appraised, as well as gathering bank and investment statements.^{[4]XResearch source}
- Attorneys who specialize in prenuptial agreements often have a checklist of information you're required to disclose for your agreement to be valid. If you've already talked to an attorney, ask them about this.
- If you know that you are getting an inheritance through someone's will, this should also be disclosed. Even if you won't get that money until after you're married, you want to make sure it's treated as your separate property.
3
Discuss the terms of the agreement. After disclosure has been made, you and your partner need to sit down and talk about how property will be divided in the event of a divorce. You can also discuss whether either party will be entitled to alimony.^{[5]XResearch source}
- It's possible you'll get an inheritance you're not yet aware of. To be on the safe side, the two of you should agree that any inheritance either of you receive over the course of the marriage will be separate property.
4
Seek independent counsel. You can draft a valid prenuptial agreement on your own. You don't necessarily need to hire an attorney to draft it for you. However, if one of you has an attorney, the other should have one as well.^{[6]XResearch source}
- One attorney can't represent both of you, because technically you have opposing interests.
- If one partner has an attorney and the other doesn't, this opens the door for the other partner to later argue the agreement is unfair and can't be enforced.
5
Execute the agreement well in advance of your wedding date. If you and your partner sign the prenup on the day of your wedding, one of you may later be able to claim the agreement was signed under duress and is invalid. Ideally, plan on signing the prenuptial agreement 4 to 6 months before the wedding takes place.^{[7]XResearch source}
- This argument may also be made if a substantial amount of money has already been invested in planning the wedding, or if non-refundable amounts have been paid for venues.
- Sign 2 copies so that both you and your partner have originals for your own records.
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Method 2

Method 2 of 3:

Entering a Postnuptial Agreement

1
Hire an experienced family law attorney. Postnuptial agreements are trickier than prenuptial agreements, and can be more difficult to enforce. A family law attorney who has experience drafting postnuptial agreements can help you ensure your agreement will be enforced in court.^{[8]XResearch source}
- When you talk to attorneys, ask about their experience drafting postnuptial agreements. Specifically, find out how many they've drafted, and if any of the agreements they've drafted were held unenforceable in court.
- While you can have one attorney to draft the agreement, your spouse needs to hire their own attorney to go over the agreement with them before they sign it. Otherwise a court may decide the agreement is unfair and unenforceable.
2
Gather financial documents. For a postnuptial agreement to be valid, there must be full and fair disclosure of the assets of each spouse. You'll need bank account and investment statements, as well as appraisals of any real property.^{[9]XResearch source}
- Your attorney typically will have a checklist of all the documents and information you'll need to make a full disclosure.
- You'll also need full statements of all debts that either or both of you have. These could impact the value of your assets. For example, if you own real property, its value is decreased by the amount of any mortgage.
3
Negotiate the terms of the agreement. The purpose of a postnuptial agreement is to determine who gets what property in the event of a divorce. You don't have to be contemplating a divorce to enter a postnuptial agreement.^{[10]XResearch source}
- Set forth which assets, including any inheritance you've received, will be considered separate property rather than marital property. This is the key to protecting your inheritance so you won't have to split it with your spouse.
4
Draft the agreement. The attorney you've chosen will create a document that includes the terms you and your spouse have discussed. It will also include other provisions that are required by law for your agreement to be valid.^{[11]XResearch source}
- The attorney will go over the agreement with you when it's complete. Your spouse should also have another attorney go over the agreement with them separately.
- Your spouse may change their mind on some terms based on their attorney's advice. Resume negotiations, and have your attorney draft a new agreement reflecting any compromise made.
5
Execute the agreement. Many states require specific formalities for a postnuptial agreement to be valid and enforceable. Typically they must be signed by both spouses in the presence of a notary. Your state may require additional witnesses.^{[12]XResearch source}
- Bring at least 2 copies of the agreement to be signed and notarized. That way both you and your spouse each have an original rather than a copy.
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Method 3

Method 3 of 3:

Creating a Trust

1
Work with an estates attorney to draft a new will. If you and your spouse both have wills, you'll both need to create new ones if you divorce. You can always go back to the attorney who drafted the original will, if possible, as they will likely have a working familiarity with its terms.^{[13]XResearch source}
- If you didn't use an attorney to draft the original will, look for an attorney who has experience drafting new wills after divorce.
- You need to update your will to reflect the divorce. You can leave your separate property to the trust you create for your children, rather than naming them as direct beneficiaries in the will. This will help protect their inheritance, since the property will no longer belong to you, but to the trust.
2
Choose your trustees. Typically you'll want to name yourself as trustee. But after your death, you'll need someone else to take over that role. You may also want to choose an alternate in case the first person you choose is unavailable.^{[14]XResearch source}
- You can also name an institution, such as a bank or law firm, as trustee.
- The person you choose as trustee should be someone you trust to manage the property in the trust. Typically you'll want someone who lives nearby. Talk to them before you include them in the trust documents, to make sure they understand and are willing to accept the responsibilities.
3
Draft trust documents. You can draft the documents to create the trust for your children on your own, or you can hire an attorney to do it. If you decide to do it on your own, look for forms that are approved as valid in the state where you live.^{[15]XResearch source}
- Most of the language in the trust documents is the same for any trust, but read through it and make sure you understand it and that it does what you want. If you have any concerns, talk to an attorney.
- Rather than naming assets you want to include in the trust directly in the trust documents, create a separate schedule of assets. That way if your assets change, you can simply change the schedule and won't have to amend the trust documents themselves.
4
Execute your will and trust documents. Your state's law requires particular formalities to execute a will for it to be valid. You may need to have additional witnesses, or have the document notarized. Trust documents, in contrast, can usually simply be signed.
- Even though it typically isn't legally required, getting your trust documents notarized can protect the trust against later challenges to its validity.
- Sign and have notarized at least 2 copies of each of these estate planning documents, and keep them in 2 separate places, so if one if destroyed the other will be available. For example, you might keep one copy at home and the other in a safe deposit box at the bank.
5
Transfer assets into the trust. Having created your trust, you still have to fund it by taking the property listed in your schedule of assets and putting it in the name of the trust instead of in your name. Depending on the property included, this may mean executing new deeds or titles.^{[16]XResearch source}
- Assuming you've named yourself as the first trustee of the trust, all you have to do in most cases is add the words "trustee for" "in trust for" after your name, followed by the name of the trust. This is typically sufficient to transfer most assets already in your name to the trust.
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Warnings

This article deals with how to protect an inheritance in a divorce in the United States. If you live in another country, or if another country's law may apply to your divorce, consult a local divorce attorney for additional guidance.
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