People filing for divorce in Illinois may be familiar with the concepts of marital and separate property. SmartAsset notes that spouses acquire marital property during the marriage, but separate property may be under the ownership of one spouse before the marriage, or it could be the result of an inheritance or gift. However, this is not to say that an inheritance does not affect the divorce settlement.
Here are some ways an inheritance may be relevant.
If the spouse who receives the inheritance deposits it in a joint account, the assets become marital property. Or, if the inheritance involves real property and the spouses use marital funds to maintain or update the house or land, the asset becomes marital property. If the inheritance involves investments, joint contributions during the marriage may affect the status of the asset.
In Illinois, courts use the concept of equitable distribution to divide assets. When it comes to deciding what is fair, judges have considerable leeway within certain guidelines, and one of the guidelines in determining fairness is the financial resources of each spouse. For example, if the inheritance sets one of the spouses up for a decidedly higher standard of living than the other, the judge may determine that that spouse does not need maintenance payments, even if that spouse has lower earning potential.
Investment News points out that inherited IRAs are not likely to be subject to division, but they may still play a role. A spouse may want to use the funds to buy out the other’s equity in the house, for example, or to exchange for other assets. The owner of the IRA should consider tax consequences before making this type of decision.