New Law Changes Treatment of Inherited Property

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Anyone who has been through a divorce knows it’s a trying process. “I just want it to be over” is a refrain uttered frequently. With a new property law passed last month, couples currently going through or even considering a divorce may want to reconsider just how quickly they finalize the process.

Currently, property that is gifted or inherited to one spouse is presumed to be shared property. When the court divides the assets of a dissolving marriage, it tends to split gifts and inheritances evenly because it presumes that spouses contributed equally in acquiring the property. In most cases, the fact that it was given or left to just the one spouse doesn’t affect how it is divided. When the clock strikes midnight to ring in 2012, that will change.

In June, Governor Kitzhaber signed Oregon Senate Bill 386, which abolishes the presumption as it applies to gifted and inherited property. Beginning January 1, 2012, as long as that property is kept separate during the marriage, it will no longer count as a marital asset during the divorce.

For example, if you and your spouse were to divorce today, inherited money held in a separate bank account is likely to be divided evenly, along with other property acquired during the marriage. Under the new law, as long as it is kept separate from your spouse, the courts will consider the money the separate property of the recipient spouse.

It is unclear whether the new law will change how the courts treat appreciation accrued by gifted and inherited property. Presently, appreciation accrued by premarital property is subject to the same presumption as other property. In the case of the inherited money, whatever interest it accrued could be divided between divorcing spouses. The issue will likely have to be resolved later by the legislature or courts.

Gifts and inheritances, like all separately held property, may still be divided during a divorce if the division is just and equitable under all the circumstances. Whether you’re going through a divorce or willing inheritances to your children, it’s important to consider how the timing of the new law could affect you. While it may feel better to complete the separation quickly, speak with an attorney if you have questions to make sure your assets are in good hands.