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If you are married and receive an estate, it can create uncomfortable situations in some cases. For example, you may feel obligated to share with your spouse, or your spouse may feel entitled to half. If you live in a community property state, you may even think you have no choice in the matter, and you are required by law to share at least a portion of your estate with your spouse.
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But the truth is that in all 50 states, regardless of individual law, federal law makes it legally not required to share an estate with a spouse. However, depending on how you handle inheritance, even blanket declarations can get messy.
Here are the legal requirements for an estate, how you should name it, and how to deal with the emotional and moral obligations generally associated with estates – especially those related to your spouse.
Legal consequences of inheritance
Legally, an estate is always considered a separate property. It doesn’t matter whether you got the estate before, during, or after marriage, it’s the same if you live in a community property state.
As long as you keep your estate as legally separate property, you will not be required to share it with your spouse even if you end up divorced.
How important it is to name your inheritance
Titles are an area where inheritance gains can get confusing. Although you are the sole legal owner of the estate you receive, if you transfer that title in any way, you will forever lose your sole legal right.
For example, if you receive an estate check for $100,000 and deposit it into your joint checking account, your spouse will immediately become a partial owner of the money. In community property status, your spouse now has legal title to more than half of the estate. This is the case even if you accidentally deposit money into your joint account and transfer it to an account in your personal name 30 seconds later.
The same is true if you use the money to buy a house and put the title in the joint names of you and your spouse. The legal term for all of these actions is “property conversion,” which means that you are changing (“converting”) your inheritance rights from a single name to a joint name.
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Emotional and ethical issues surrounding heritage
Of course, legal issues are not the only issues surrounding inheritance. Many times, emotions are also related to finances.
For example, imagine a scenario where two spouses share a joint bank account, both have their names written on the title of their house, and otherwise share everything financially. If one of the parties receives an estate, the other may expect the funds to be deposited into their joint account for both parties to share. However, the inheritance spouse may have been advised by a lawyer or even a friend to keep the money separate in case the marriage dissolves at some point in the future. This obviously rubs against non-inherited spouses the wrong way.
Another common situation is when the inheriting spouse intends to share everything financially, but the deceased asks to split the inherited money. In such a situation, it may be difficult to decide whether the beneficiary should act against the deceased’s will or as required to avoid conflict with his or her spouse.
What do the experts say?
The bottom line on inheriting an estate is that it’s hard to make the right financial moves without risking an emotional reaction. For this and many other reasons, it is necessary for a couple to sit down with a financial planner and/or attorney to discuss any future inheritance options and outcomes before they actually happen. This way, a couple can come to an agreement on how to handle these types of situations before the emotions heat up.
However, professionals can also help in other ways. According to New York estate planning attorney Martin M. Shenkman, “The most important thing that an independent professional brings is objectivity.” In other words, having a professional by your side when making emotional decisions about money Very helpful.
Another advice on inheritance comes from GHMA Law, which emphasizes that using a prenuptial or postnuptial agreement is a good way to resolve disagreements about inheritance in advance and then agree to it in writing.
Regardless of what you choose to do with your estate, it is important to address the issues as early as possible. This will both help you avoid unpleasant emotional conflicts with your spouse and help you maintain ownership of your money as you wish.
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