In California, separate property includes assets owned before marriage, and gifts and inheritances received during the marriage. While inheritances are generally considered separate property, they can become commingled with community property (assets acquired during the marriage) if not carefully managed. For instance, depositing an inheritance into a joint bank account used for household expenses could transform the inheritance, or a portion thereof, into community property subject to division in a divorce. Similarly, using inherited funds to improve a jointly-owned home may also create a community property interest in the increased value.
Understanding the distinction between separate and community property is crucial in protecting individual financial interests during marriage and in the event of divorce. Clear documentation and careful financial management can prevent unintended commingling, preserving the separate property nature of an inheritance. This is particularly important in California, a community property state where assets acquired during marriage are generally divided equally upon divorce. Protecting inheritances as separate property ensures that these assets remain under the sole control of the intended beneficiary.
