Time and time again, we’ve discussed the importance of distinguishing marital from non-marital property in a divorce. Most people reasonably believe that an inheritance, by its nature, is not marital property. In general, they are correct. But that is not always the case.

First of all, why is it important to distinguish marital from non-marital property? All marital property is subject to being split between the parties in a divorce, whereas non-marital property cannot be touched. So, it becomes very important when we are able to remove an asset entirely from the reaches of the other spouse.

How does this concept apply to an inheritance? Generally, property acquired during the marriage by inheritance is non-marital property under Pennsylvania law. (23 Pa.C.S.A. § 3501(a)(3)). However, once non-marital property is co-mingled with marital property, it loses its identity as non-marital property and becomes marital.

What does that mean? How does non-marital property become marital property? It’s easier than one might think. In the case of Verholek v. Verholek, a husband used some of his inheritance money to buy the parties’ first home, which was deeded in both names. He placed the remaining inheritance money into a brokerage account, which was previously opened with marital funds and named both spouses as owners. When the parties later sought a divorce, the husband wished for his inheritance money to be treated as non-marital property and excluded from equitable distribution (Verholek v. Verholek, 741 A.2d 792, 797 (Pa. Super. 1999)).

The Pennsylvania Superior Court held in this case that the inheritance money was in fact marital property and subject to equitable distribution between the parties. The Superior Court first pointed to a case, Rohrer v. Rohrer, 715 A.2d 463 (Pa.Super 1998), which held that money that moves in and out of marital accounts loses its non-marital characteristic. Secondly, the Court looked to Barner v. Barner, 527 A.2d 122 (1987), which held that a court must consider the parties’ intent when determining if an asset is “marital property.” (Verholek at 797).

The money that was used to purchase a marital home is much easier to understand. The home purchased by the parties was deeded to both husband and wife. Case closed. Even if they only used the inheritance money to purchase the home, it’s clear husband intended for it to be marital property since he added wife to the deed.

The brokerage account can be more complicated, but it isn’t in this particular case. If you add non-marital funds to a jointly held bank account, those funds are transformed into marital funds. The court is not willing to engage in the process of determining what portion of a bank account is marital versus non-marital. As soon as non-marital funds enter into a marital account, they become marital.

What can we learn from this? Financial planning is very important when getting married or even when seeking a divorce. It’s critical to speak with an attorney who can help you to understand the risks and possible consequences of your actions.

If you or anyone you know is looking to get a divorce or is considering marriage and has assets they want to protect, our team would be happy to discuss their options. Please email or call us, and we will be happy to schedule a consultation.