You may have a valuable family heirloom or a down payment gifted by your parents. These assets often feel sacred and untouchable. Yet, Indiana law sees all property owned by either spouse, before or during a marriage, as part of the marital estate.
Indiana’s “one pot theory” includes all property. While neither spouse can exclude gifted or inherited property from the marital estate, state law allows a court to consider the property’s origin as a factor to counter the presumption of an equal (50/50) division.
Defining separate assets
Inherited property comes to you after someone’s death, often through a will or trust. Spouses receive gifted property while the donor is still alive. In Indiana, the court must include these assets in the marital pot.
The law does not initially presume you should receive the value of the asset at the time you received it. Instead, the statute begins with a presumption of an equal division of the entire marital estate. The fact that you are the sole recipient of the gift or inheritance is a factor the court considers.
To argue that an asset is separate property, you need clear records to prove its origin and value. You must document:
- The source of the gift or inheritance
- The exact date you received it
- Its specific value on that date
Keeping detailed records is the most critical step to proving the asset’s origin and value. You will need to show this documentation to the court.
When does separate property become shared?
Separate assets lose their distinct status when they are “commingled” with marital funds. For example, depositing inherited money into a joint checking account used for monthly shared bills mixes the funds.
Any appreciation in the asset’s value during the marriage, whether due to active management or passive growth, is included in the marital estate and subject to division. Active contribution or management by a spouse only strengthens the argument for an equal division of those gains.
A gifted home, including all equity, is automatically included in the estate. Using marital funds or labor to improve the house can significantly increase the difficulty of contesting the presumption of an equal (50/50) division of the asset’s value.
However, a judge can deviate from the initial presumption if a strictly equal division would not be “just and reasonable” based on your family’s unique situation.
Safeguard your legacy
Protecting these special assets requires careful planning and meticulous documentation. You must act strategically to keep the funds separate and maintain clear records over time.
Because the rules governing inherited and gifted assets are nuanced and fact-specific, understanding how they are treated in a divorce requires skilled legal representation. An experienced divorce attorney familiar with Indiana’s complex property division laws can help you ensure your financial legacy remains intact and secure.
