In Indiana, when one party receives an inheritance, one of the first questions in a divorce is whether the inheritance is considered marital property?
The short answer to this question is, yes, the inheritance is marital property. Indiana operates under the “one pot” theory of marital property. All property belonging to either or both spouses is considered marital property.
But just because an inheritance is considered marital property, does that mean it will be split evenly between the parties? No.
Inherited property and property brought into the marriage are all put into the pot and subject to division by the court. However, the court can consider whether that property should be set aside to the spouse who inherited it or brought it into the marriage. This requires a consideration of whether there should be a deviation from the presumptive 50/50 split of the marital estate.
The court will attempt to effectuate a just and reasonable division of the property. The court will presume that an equal division is just and reasonable under Indiana law, however, that presumption may be rebutted by evidence presented by the parties.
The court will consider many factors in determining whether to deviate from the presumptive 50-50 split. These factors include:
1. The contribution of each spouse to the acquisition of the property, regardless of whether the contribution was income producing.
2. The extent to which the property was acquired by each spouse
a.) before the marriage; or
b.) through inheritance or gift.
3. The economic circumstances of each spouse at the time the disposition of the property is to become effective, including the desirability of awarding the family residence or the right to dwell in the family residence for such periods as the court considers just to the spouse having custody of any children.
4. The conduct of the parties during the marriage as related to the disposition or dissipation of their property.
5. The earnings or earning ability of the parties as related to
a.) a final division of property; and
b.) a final determination of the property rights of the parties.
In reviewing inherited property or property owned prior to the marriage, the court will evaluate whether the property was commingled with marital property; whether it was titled or held solely in one spouse’s name; whether marital funds were used to fund the property; whether the other spouse contributed either financially or otherwise toward the acquisition of the property; and whether the spouse had any decision making or other power or control regarding the property.
If the property was not kept separate, that will likely not warrant deviating from the presumptive 50-50 split by setting that property aside.
For example, if the property was acquired by inheritance from the husband’s mother; was gifted only to the husband during the marriage and the wife had taken no action such as filling a caretaker role for the mother; the funds were placed into an investment account solely in the husband’s name and wife was not consulted regarding the decision or about which investments and made no financial or other contribution toward the investment account; and no marital funds were ever deposited into the investment account, then the husband would have a strong claim for setting aside the inherited property solely to him under that factor.
However, in making property division awards, the courts will not look at only one factor in isolation. The court must consider all of the factors to determine whether the award would be just and reasonable.
If in the example above the husband had a significantly higher earning capacity than the wife and there were claims that the husband had dissipated (wasted or misused) marital property, then when weighed against the evidence of the inheritance, it is possible that the court would consider a 50-50 division would be just and reasonable or even a division slightly in favor of the wife.
In making property divisions, the trial court has great discretion in determining whether a division would be just and reasonable.
In fact, if a property division is appealed, so long as the evidence supports the ruling of the trial court, even if the appellate court would have reached a different ruling, the appellate court will not disturb the ruling of the trial court.
The appellate court will only overturn a property division made by the trial court if the evidence does not clearly support the ruling and the division is not just and reasonable.