The Distribution of Inherited Property in a Divorce

January 29, 2013

In September 2012, the Court of Appeals of Oregon opined on issues relating to the division of inherited property pursuant to a divorce. The case sheds light on some important property division issues.

Morton v. Morton began when Wife filed for divorce. A lower court awarded Wife spousal support and allocated the couple's property and debts between Husband and Wife. After the case, Husband appealed the property division.

The crux of the appeal was Wife's inheritance from her father during the last years of the couple's marriage. In the Court of Appeals, Husband challenged the lower court's assessment and treatment of Wife's inheritance in the property division process, saying he was entitled to some of it.

Morton v. Morton: The division of marital assets

Under Oregon law, the court in a dissolution action is to divide the divorcing couple's real and personal property "as may be just and proper in all the circumstances."

Property subject to division falls into two categories. The first category is "marital property," which consists of any property that the parties hold, not considering when it was obtained. The second category of property, "marital assets," is a subcategory of "marital property" and includes property acquired during the marriage.

The law presumes that both spouses contributed equally to the acquisition of marital assets; however, this assumption can be rebutted. A party seeking to challenge the presumption of equal contribution has the burden of showing that the other spouse did not contribute equally to the attainment of the property in question.

In this case, Wife rebutted the presumption of equal contribution in regard to her inheritance, which she received after her father's death. Wife could rebut the presumption of equal contribution by showing that the inheritance was uninfluenced by Husband. Specifically, Wife had to demonstrate that Husband did not contribute to the acquisition, and the father did not intend for the inheritance to go to Husband.

A statement from Wife's brother and additional evidence suggested that the father of Wife had no explicit intention to apportion any of the inheritance to Wife's former spouse. The trial court determined that Wife's father had intended to benefit only his children and agreed with Wife's rebuttal.

Next on appeal, Husband argued that he deserved a portion of the inheritance because he contributed to the attainment of it. In order to show that a spouse contributed to the acquisition of the inherited property, the contribution must have influenced the inheritance.

The appellate court determined that Husband's actions and efforts after Wife's father passed away may have resulted in an increase in the value of the inheritance (for example, he reappraised the inherited property and made other efforts to increase the value); however, Husband did not specifically influence the father-in-law's estate distribution decision. Therefore, he did not contribute to the acquisition of the inheritance.

In addition, Husband argued that because of Wife's commingling, or integration, of her inheritance with other marital property, the inheritance should have been included in the division of marital assets.

The Court of Appeals determined that the question as to whether the inheritance was commingled was not dispositive. In fact, acts of integrating property do not guarantee the inclusion of separately acquired property in the property division process.

Instead, the law asks courts to evaluate the extent to which a spouse has integrated a separately acquired asset into the joint finances of the marriage. Furthermore, the court must decide whether any injustice would result from transitioning the separate property to marital assets and dividing it accordingly.

In this case, while substantial portions of Wife's inheritance may have been commingled with the couple's other assets, it was fair and just to award the inheritance to Wife. In making the decision, the court looked to the economic self-sufficiency of both spouses and the particular needs of the parties. The court determined that Wife needed the assets for financial support. Due to her mental disorders, Wife had essentially no income-earning capacity. Husband was found to be capable of earning money and reasonably close to the receipt of retirement benefits.

With this analysis, the court found that the lower court did not err in its evaluation, assessment and distribution of the inherited property.

This case sheds light on how inherited property may be assessed in a property division case. The process is extremely complex and depends on several factors. If you are dealing with the division of marital property in your divorce, you should contact an experienced family law attorney for legal assistance.

Article provided by Suzanne J. Noland
Visit us at www.suzannenolandlaw.com