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Specialty tag(s): Complex Property, Pre-Divorce Guidance, High Net Worth Divorce, Divorce

How is Inherited Property Handled in a Divorce?

Ryan R. Bauerle | May 15, 2025

The division of assets is a very common and valid cause for concern during a divorce. Many divorcing couples worry about what they will be left with when the proceedings are over and the divorce is finalized, leading to anxiety over the future. When it comes to inherited property and divorce, the situation can be even more confusing, as many are unaware of how to protect any inherited property in a divorce; and the laws concerning inherited property in Texas.

Is an Inheritance Community Property in Texas?

No, an inheritance is not community property in Texas. On the contrary, inherited property – irrespective if acquired before or during a marriage – is separate property. This is important because a court cannot divest someone of their separate property. Texas follows community property laws, which means that presumptively, any assets acquired during the marriage are considered community property, making them subject to division. However, the Texas Family Code specifically carves out exceptions for inheritances, and that anything acquired by “gift, devise, or descent” is a spouse’s separate property. It’s important to note, however, that there are circumstances whereby you can, purposefully or inadvertently, convert your inherited separate property into community property. Understanding what circumstances might risk your ability to retain your inheritance can help you make the best decisions regarding how to protect your inheritance from your spouse in your specific situation.

When Does an Inheritance Become Community Property in Texas?

Knowing how to protect your inheritance from a divorce starts with understanding the ways in which it can become subject to division. The court could potentially divide inherited property in the divorce in a few different situations:

• By Agreement: Often called a “conversion agreement,” this is the exact opposite of a premarital agreement. Although rare, sometimes, spouses agree to convert their separate property to community property. Often this is done to effectuate some sort of tax relief.
• If You Commingled Your Inheritance With Other Assets: If inherited funds are deposited into a joint bank account and used for marital expenses or combined with other marital assets, the separate property is so hopelessly commingled that it cannot be traced. The inheritance may no longer be considered separate property because you cannot satisfy your burden of proof to classify the funds as inherited. Tracking down the inherited property is called “tracing” and sometimes requires the use of a tracing expert to show the paper trail.
• If Separate Property Is Titled in the Other Spouse’s Name: If one spouse owns separate property and titles it in their spouse’s name (such as adding a spouse’s name to the title of a separate property residence), a presumption arises that a gift was intended.
• If Separate Property Is Placed In An LLC: Many spouses inadvertently divest themselves of separate property by doing something they think will protect them, but this action does the opposite. For example, let’s say that you own a piece of real estate that is your inherited separate property. You decide you are going to rent it out, set up a company, and put that real estate in a limited liability company (LLC). You may even get advice from a lawyer telling you that that’s a good idea. As part of that process, you deed the real estate to the LLC. The problem is that in this example, in a divorce, you no longer own that piece of real estate. What you own at that point is instead an interest in an LLC you acquired during your marriage. That LLC, formed during the marriage, is presumed to be community, not separate, property. So even though you owned a piece of real property that you clearly could prove was your separate property, by putting it into the LLC, you likely lost your right to claim that property as your separate property.

Get Help From a Skilled Divorce Attorney to Protect Your Future

Dealing with inherited property in a divorce can bring an extra layer of complexity to the process, requiring a deep understanding of Texas family law. At Goranson Bain Ausley, our team of experienced divorce attorneys is well-equipped to help you protect your interests and ensure the equitable division of property. If you are facing a divorce involving inherited property, contact us today to discuss your case and learn how to protect your inheritance from your spouse.

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