Inheritances, and the marital estate, are your inheritances subject to equitable distribution?

Many clients come into our office from the towns of Fairfield County with family money they inherited during the marriage, or which they anticipate inheriting after a dissolution proceeding.  Sometimes clients want to know whether the inheritance they have already received or anticipate receiving, will be considered part of the marital estate subject to equitable distribution at the time of dissolution.

At the time of entering into a judgment or dissolving a marriage, any inheritance already received is considered a part of the marital asset, subject to equitable distribution pursuant to C.G.S.A. § 46b-81(a)-(c). The recipient spouse does not have a de-facto right to 100% of the value of these funds.  In determining how these funds shall be divided, the Court will consider all of the factors enumerated in the statute, including but not limited to the contribution each party made to the acquisition, preservation or appreciation in value of the inheritance, how the funds are held, whether commingled or separate, when they were acquired during the marriage, and the age, station, occupation, income, health, and estate of the parties. The Connecticut Courts examine all of these factors on a case by case basis to determine what constitutes an equitable distribution of the marital estate, including either spouse’s inherited assets.

Dividing inherited assets is not always a straightforward process. Great care must be taken in order to identify the specific nature of the inherited assets. For example, if a spouse received an inheritance in the amount of $1,000,000 during a twenty year marriage and the total value of the marital estate at the time of divorce is $1,500,000, the Court might equally divide the entire marital estate, including the inheritance.  By contrast, if it was a five year marriage, and one spouse had inherited $200,000, and the total marital estate was worth $5,000,000, the Court may allocate the receiving spouse with a credit of $200,000, especially if the funds were kept separately.  Courts will not only look at the inheritance received, but as previously noted, they will also consider any appreciation in value of the inheritance.  Additionally, the Courts will examine which spouse was responsible for the appreciation in value. For example, there may be circumstances where a spouse received a $100,000 inheritance and the other spouse actively invested the inherited funds.  If as a result of the non-inheriting spouse’s sole efforts the value of the inheritance increased significantly, the Court may take this into consideration.  The Court might also examine how the funds were being held, and whether the inheritance was kept as one spouse’s separate and distinct property and/or whether all or a portion of the funds had been commingled with the investing spouse’s funds.  If the funds were commingled into a joint account, a court may be more likely to equally divide the inheritance, including any appreciation in value.  What the Court finds equitable depends in part on myriad of factors, including the size of the marital estate, each party’s contribution to the preservation and/or appreciation in value of the inheritance, and how the funds have been held.

The important thing to understand is that unlike many other states, Connecticut does not treat an inheritance as the recipient’s separate property shielded from distribution to the non-inheriting spouse. The inheritance is subject to equitable distribution.  At Broder & Orland, LLC we understand the complexities associated with inheritances, and we frequently advise clients as to the myriad of factors a court takes into consideration when examining and distributing the marital estate.