Q: I’m married and recently received an inheritance, which I would like to use to buy some real estate as a sole and separate owner.
How do I do this to avoid any spousal claims to rights, title, and interest in the property? And how do I steer clear of any IRS infractions? I’m afraid that if I don’t somehow separate this purchase from our joint household business, I could create some spousal claim on the property and future IRS tax issues.
A: Even if you’re married, the IRS recognizes the ability to keep an inheritance separate from marital assets. You are entitled to use funds that are outside the marital estate (like an inheritance) to buy property that you own on your own.
You should start by finding a good estate attorney or real estate attorney who can help you figure out what you want to do and what will be the best vehicle for ownership of the property. You may want to purchase this property in a trust, which the estate attorney could draft for you and then the real estate attorney can help you close on the purchase.
If you don’t know how to find a good attorney, contact your local bar association and ask for the chair of the estate and real estate committees. Those attorneys will be well-connected locally and will be able to point to you attorneys who can help with your specific issues.
You should also remember that once you have purchased this property and claim it to be separate of your household, if you need to invest money into the upkeep of the property, you may not want to use marital money. If the property is truly to remain separate from the marital assets, then you shouldn’t use marital assets to pay for expenses relating to that property.
But, to keep the inheritance safe, you probably need a good estate planner to help you out.