Estate Planning: Is Inheritance Marital Property in Montana?

When you receive an inheritance in Montana, it’s immediately classified as separate property (not marital property).

This classification is crucial for estate planning and managing assets within a marriage. 

Unlike marital property, which is subject to division in the event of a divorce – separate property remains solely with the individual who received it. However, this clear distinction can become complicated if the inherited assets are commingled with marital assets or used for joint purposes. 

Anyone managing personal assets in Montana should pay attention to the initial classification of inheritance as separate property.

 

Key Takeaways

 

• Inheritance is generally considered separate property in Montana, protecting it from division during divorce proceedings.
• Assets acquired during the marriage are typically viewed as marital property, with some exceptions like individual inheritances and gifts.
• Clear documentation and careful planning so inheritance remains separate property.
• Equitable distribution laws in Montana mean that marital property is divided fairly, not necessarily equally, in the event of a divorce.
• Consulting with an estate planning attorney is highly recommended to navigate Montana’s specific laws effectively.

 

 

Understanding Marital Property in Montana

 

Montana views marital property as almost everything acquired by either spouse during the marriage, except for individual inheritances or gifts. 

This broad definition includes income, real estate, and personal property bought or earned during the marriage. 

The distinction between marital and separate property directly impacts estate planning and asset division in divorce cases.

 

Examples of Marital vs. Separate Property

• Marital Property: This includes items like homes bought during the marriage, jointly owned vehicles, and savings accounts contributed to by both spouses.
• Separate Property: Items like inheritances received by one spouse, personal gifts from someone outside the marriage, and any property owned before the marriage that has not been commingled.

 

Examples of Marital vs. Separate Property

Type of Property	Marital Property	Separate Property
Real Estate	Homes bought during the marriage, regardless of whose name is on the title.	Real estate owned by one spouse before the marriage or inherited.
Vehicles	Cars purchased together during the marriage.	Vehicles owned before the marriage or received as a personal gift.
Bank Accounts	Jointly owned checking and savings accounts.	Individual accounts that were kept separate throughout the marriage.
Personal Property	Furniture, electronics, and art acquired during the marriage.	Items owned individually before the marriage or received as gifts.
Investments	Stocks, bonds, and mutual funds bought during the marriage.	Investments owned prior to marriage or inherited by one spouse.

 

Equitable Distribution: How Montana Courts Decide

 

Montana’s approach to dividing assets during a divorce centers on equitable distribution, but let’s clear up a common misunderstanding right from the start: equitable doesn’t mean equal. 

Instead, it focuses on what’s fair. 

It takes into account the unique circumstances of each marriage. The courts look at a variety of factors, from the length of the marriage to each spouse’s financial contributions and needs. 

It’s about reaching a balance that respects both parties’ contributions to the marriage, whether financial or otherwise.

In practice, this means the court takes a comprehensive look at the couple’s life together. They’ll consider everything from who earned more to who took care of the home or the children. It’s about recognizing and compensating for the different ways each spouse contributed to the marriage’s shared life. (1)

 

Inheritance and Marital Property: Where Does Montana Stand?

 

Montana treats inheritance as separate property, but with a catch: it remains separate only if it’s kept apart from marital assets. 

Mixing inheritance with marital assets, like depositing it into a joint bank account, can change its status. Here’s what typically flips inheritance from separate to marital property:

• Depositing inherited funds into a joint account used by both spouses.
• Using inherited money for a marital home or a shared investment.
• Renovating a marital property with inheritance money.
• Gifting a portion of the inheritance to the other spouse.
• Commingling inherited assets to the point where they can’t be distinguished from marital assets.

 

Factors Influencing Asset Division in Divorce

 

Montana Courts examine several key factors to facilitate equitable division of assets. Here are the top five considerations:

1. Length of the marriage: Longer marriages may see more equal divisions, especially if one spouse sacrificed career opportunities.
2. Financial status of each spouse: Courts look at current earnings, potential for future earnings, and overall financial stability.
3. Contributions to marital property: This includes not only financial investments but also non-financial contributions like home upkeep and childcare.
4. Future earning potential: Education, career prospects, and age can all influence how assets are divided.
5. Health and age of both spouses: Health issues or significant age differences might affect the division, ensuring both parties can maintain a reasonable standard of living post-divorce.

 

Protecting Your Inheritance from Becoming Marital Property

 

Use of Prenuptial Agreements

Prenuptial agreements are not just for the ultra-wealthy. They serve as a practical tool for anyone looking to clearly define which assets remain separate property, inheritance included. By specifying your inheritance as separate in a prenuptial agreement, you establish legal grounds to prevent it from being considered marital property in case of a divorce.

Keeping Inheritance Separate

Keep your inheritance in a separate account to guarantee it remains yours. Do not use these funds for marital expenses, like home improvements or joint investments. The clearer the separation, the stronger the case that these assets are not marital property.

Legal Advice and Estate Planning

Consulting with an estate planning attorney is key to protecting your inheritance. They can offer tailored advice and strategies, such as creating trusts, to shield your inheritance from being lumped in with marital assets. Proper legal guidance tailors your estate plan to meet your specific needs and comply with Montana’s laws.

 

Practical Tips for Estate Planning in Montana

 

Effective estate planning in Montana requires understanding the tools at your disposal. Legal documents like wills and trusts are fundamental in delineating how your assets are handled, both in life and after.

 

Benefits of Wills vs. Trusts in Protecting Inheritance

Estate Planning Tool	Benefits in Protecting Inheritance
Wills	Specifies heirs and asset distribution but goes through probate, potentially becoming public.
Trusts	Offers more control and privacy, bypasses probate, and can protect assets from marital disputes.

 

Conclusion – Your Trusted Estate Planning Attorney

 

Estate planning and inheritance laws in Montana are crucial to safeguarding your assets. 

Strategies like using prenuptial agreements, maintaining separate accounts for your inheritance, and seeking specialized legal advice play vital roles in this process. Trusts and wills each have their strengths in protecting your inheritance, offering different levels of control and privacy.

Montana Elder Law is a trusted local expert for Estate Planning and Elder Law. 

With expertise in estate planning and inheritance laws, they’re a trusted resource committed to their clients. Reach out today at Mtelderlaw.com

 

 

 

Reference:

(1) Smart Asset, Montana Inheritance Laws: What You Should Know, https://smartasset.com/financial-advisor/montana-inheritance-laws