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A trust may protect an inheritance during divorce

Technically speaking, an inheritance that your parents gave you may already be protected during divorce, especially if your parents' will specified that the money was not for your spouse.

That said, this does take some work on your end. You generally have to keep that inheritance money separate from your family's other funds. If you don't, it's called commingling, and your spouse may then be able to claim he or she also has a right to that significant asset.

The problem is that putting your inheritance money into a joint bank account, for instance, gives your spouse legal access to that money. If you use the money to pay joint bills -- like the mortgage -- that just demonstrates that you're allowing your spouse to use it. When you split up, your spouse may then claim that your keeping all of the remaining money deprives him or her of that asset.

One way that parents can protect an inheritance is by keeping it out of your estate to start with. This can be done by putting the money into a trust, rather than giving it to you directly. You'll be the only one who has access to the trust or who gets regular payouts from that trust. Even if those smaller monthly payments are commingled, the remaining balance of the trust is outside of your spouse's reach.

Finances can get rather complicated during divorce, which is why they often lead to conflicts and lengthy court cases. To make everything go smoothly, be sure you understand all of your legal rights, your financial picture, and exactly what steps you can take to protect those assets.

Source: FindLaw, "How to Protect Your Children's Inheritance in Divorce," George Khoury, accessed Sep. 29, 2017

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