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How Will Your Inheritance Be Treated in a Michigan Divorce?

If you and your spouse have recently started proceedings to legally end your marriage, you may be feeling a complicated and sometimes incongruent mix of emotions. From relief to sadness or even excitement, closing this chapter of your life and beginning another can prompt many unexpected feelings.

Unfortunately, the divorce process can be rendered much more complex if you find yourself the recipient of an inheritance or other lump-sum payment shortly before your divorce or while proceedings are ongoing.

Will you be required to share this inheritance with your soon-to-be ex-spouse? How hard will you need to fight to keep these funds to yourself?

While Michigan is an equitable-distribution state rather than a community-property state, this doesn't mean that keeping an inheritance is automatic. Read on to learn more about how Michigan law divides marital assets and what you'll need to do -- and prove -- to ensure your inheritance is exempted from the marital pot during the asset-division process.

How Marital Assets Are Divided

In Michigan, any assets that are jointly held by the divorcing couple at the time the divorce papers are filed are classified as "marital assets."

The "marital estate," consisting of marital assets and any joint debts, is considered closed upon the date the initial separation or petition for dissolution is filed. This means that any funds inherited, awarded or otherwise received after a divorce has already been filed usually won't be counted toward the pool of marital assets.

However, this can vary by state. Some states have treated separated-but-not-yet-divorced couples as married when it comes to things like winning the lottery; for instance, the proceeds from a winning ticket that was purchased before a divorce was finalized could be split between the couple even if only one spouse did the purchasing.  

Because of this, it's important to proceed carefully if you're attempting to exclude your inheritance from the marital estate.

How Inheritances Are Exempted

An equitable-distribution state like Michigan, unlike community-property states, generally affords to each spouse the assets that were earned or acquired by that spouse during the marriage, with some discretion to amend this division when appropriate.

This can mean that an inheritance directed to only one spouse may be kept by that spouse during divorce without requiring that spouse to give up other marital assets in return. This reasoning also applies to things like personal-injury settlements and other payments that are intended to assist or compensate only one half of a married couple.

However, there are also cases addressing the issue of unjust enrichment and cases indicating that it's usually in a minor child's best interest for both parents to provide a similar standard of living as the one the child experienced prior to divorce.

Cases like these can mean that a multi-million dollar inheritance that was used to enrich both your life and your soon-to-be ex's life could be factored into the ultimate distribution of property if one of two situations occurs:
  • The court deems it's in your child's best interest for both you and your ex to maintain an elevated standard of living.
  • our ex can otherwise show that allowing you to keep the entire inheritance is inequitable and would disadvantage him or her financially.
A lawyer can help you to determine if either of these scenarios apply in your case.

How to Proceed

If you're concerned about protecting your inheritance from a soon-to-be ex-spouse, you'll want to seek legal advice quickly. Even if you and your spouse agree on most issues, inheritances can be difficult circumstances, and having a professional to sort out the facts and argue on your behalf can be invaluable.

You'll also want to begin gathering financial documentation to be used in your divorce. Judges are trained in the law, not finance, and the ability to provide a clear "paper trail" for your inheritance can strengthen your argument and minimize confusion in the courtroom.

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