Investment Account Funded By Inheritance Became Marital Property
In terms of property division during a divorce, Georgia is an equitable distribution state, meaning that marital property will be divided in a fair or equitable manner. However, separate property, such as property owned prior to a marriage or inherited during a marriage, may be excluded from equitable division.
Even with an inheritance, though, a spouse must still be careful how the funds are handled, if he or she intends to maintain the inheritance as separate property. The Georgia Supreme Court case of Shaw v. Shaw provides an example of the potential pitfalls in this area.
Two investment accounts . . . funded by an inheritance
After some 40 years of marriage, the couple filed for divorce in 2009. Most issues were resolved in the divorce action, except primarily for the equitable distribution of two investment accounts the husband had established with funds he had inherited from his mother.
In its final decree, the trial court resolved that the two investment accounts should be equally divided between the parties. The husband argued that the trial court erroneously treated the two investment accounts as marital property and appealed this decision.
Separate . . . or marital property?
The husband argued that since the investment accounts were funded using money he inherited from his mother, the accounts should not be subject to equitable division. The Georgia Supreme Court noted that, indeed, property acquired during a marriage by one spouse by gift or inheritance remains the separate property of the spouse who receives it.
However, while such an inheritance may begin as separate property, that property may be converted into a marital asset by the actions of the recipient spouse. Here, the husband had opened the two accounts for the purpose of receiving the assets he inherited. Yet, from the outset, he established them in both his and his wife’s name to be held as “joint tenants” on the account with right of survivorship — meaning that if one spouse died, the other would own the account.
The husband thus showed intent to transform this separate, inherited property into marital property. Because each of them owned an undivided one-half interest, the accounts were actually marital property. The fact that the wife did not contribute to the value of either account and that the funds were not commingled with other funds did not change the fact that the husband had transformed them into marital property when he gave the wife an ownership interest in the property.
Therefore, the decision to classify the investment accounts as marital property in the divorce proceedings was affirmed.
Smoothing contentious issues
Division of assets is a crucial part of any divorce proceeding, and often a contentious issue as well. If you are contemplating a divorce, seek advice from an experienced family law attorney who can work with you to resolve any issues as smoothly and amicably as possible.