Many couples use joint bank accounts to manage their finances together. One might wonder what happens if one spouse deposits their inheritance into a joint bank account.
Does state law allow them to spend those funds freely? The answer, like many legal issues, depends on a few key factors.
The distinction between separate property vs. community property
California operates under a community property system; both spouses jointly own most assets acquired during the marriage. However, inheritances are separate property belonging solely to the inheriting spouse. However, this distinction only holds true as long as the inheritance remains separate from marital funds.
When separate becomes shared
The complication arises when the inheriting spouse deposits their inheritance into a joint account. This is called commingling, which means mixing separate with community property. State courts can interpret commingling as an intention to convert separate property into community property. Therefore, the other spouse might have legal access to an inheritance deposited into a joint account.
Here’s where things get even trickier: Imagine a couple using some of the inheritance to purchase a house, titling it jointly in both their names. This is called transmutation, which can also convert separate property (inheritance) into community property (jointly owned house).
Strategies for clarity
If you want to help ensure your spouse can’t freely access your inheritance, there are strategies you can consider to protect your windfall. The most crucial is depositing your inheritance in a separate account that’s under your name. This can enable you to maintain a clear boundary between the marriage’s separate and community property.
Suppose you deposit some of the inheritance into a joint account. In that case, you should meticulously track all deposits and withdrawals related to the inheritance funds. This detailed record-keeping can be helpful if disputes arise later.
If you and your spouse don’t already have a prenuptial agreement, you can suggest creating a postnuptial agreement to explicitly outline how inheritances will be handled.
If you receive an inheritance, open communication with your spouse is crucial. By discussing your wishes for the inheritance, you can anticipate and avoid potential conflict. Remember, California’s community property laws can be complex. As such, getting feedback from a reliable legal team can provide the guidance you need to address your financial concerns.