Is Inheritance Community Property in California?

If you inherited money or property from a family member, you likely want to know if your soon-to-be ex-spouse is entitled to half of it in your divorce.

California is a strict community property state, meaning almost everything acquired during the marriage is split 50/50.

But there is a major exception to this rule: inheritances. Here is exactly how California law treats inherited assets, and the common mistakes that can accidentally give your spouse a claim to your family money.

The Separate Property Rule

Under California Family Code Section 770, separate property includes all property owned before the marriage, and all property acquired during the marriage by gift, bequest, devise, or descent.

In plain English: If your parents leave you money, a house, or a stock portfolio in their will, that inheritance is 100% yours. It is your separate property. Your spouse has no legal claim to it, regardless of whether you received it before you got married or while you were married.

Furthermore, any "rents, issues, and profits" derived from that inheritance are also your separate property. If you inherit an apartment building and rent it out, the monthly rental income belongs entirely to you.

The Danger of Commingling

While the law clearly protects your inheritance, your own actions can accidentally convert that separate property into community property. This is called "commingling." The full mechanics of how separate property becomes community property deserve a closer look — but here are the most common traps.

Commingling happens when you mix your separate inherited funds with community funds, making it impossible to tell which dollars belong to whom.

Example 1: The Joint Bank Account

If you inherit $50,000 and deposit it into the joint checking account that you and your spouse use to deposit your paychecks and pay your daily bills, you have commingled the funds. If you get divorced three years later, it will be incredibly difficult to prove to a judge that the $50,000 remaining in the account is exactly the same $50,000 you inherited. The court will likely presume the entire account is community property and split it 50/50.

Example 2: The Family Home

If you inherit $100,000 and use it to make a down payment on a house that you and your spouse buy together, title jointly, and pay the mortgage on using your marital income, you have commingled the asset. In a divorce, the house is community property.

Note: Under Family Code Section 2640, you do have the right to be reimbursed for the $100,000 separate property down payment, but you must have the financial records to trace the money back to the inheritance. You will get your $100,000 back, but any appreciation in the home's value will be split 50/50.

How to Protect Your Inheritance

If you receive an inheritance during your marriage and want to ensure it remains your separate property in the event of a divorce, you must take proactive steps:

1. Open a separate account: Deposit the inherited funds into a brand new bank account that is solely in your name.
2. Never deposit marital funds: Do not deposit your paycheck or any other community money into this new inheritance account.
3. Keep the title separate: If you inherit real estate, do not add your spouse's name to the deed.
4. Do not use community funds for upkeep: If you inherit a house, do not use money from your joint checking account to pay the property taxes or fund a kitchen remodel. If community money is used to improve separate property, the community gains an interest in the property.

Transmutation by Agreement

Finally, be aware that you can legally change the character of your inheritance from separate property to community property through a process called "transmutation."

If you sign a legal document (like a deed or a written agreement) explicitly stating that you are transferring your inherited property to both you and your spouse as community property, the court will enforce that agreement. You cannot take it back during a divorce. Start your California divorce packet and we'll make sure your inheritance is correctly characterized on your disclosures.