If I use inherited money to start a business then get a divorce later, will my partner receive half of the business assets?

Asked on October 15, 2011 under Family Law, California

Answers:

S.L,. Member, California Bar / FreeAdvice Contributing Attorney

Answered 9 years ago | Contributor

Separate property is property acquired before marriage or after the marriage ends.

Community property is property acquired during marriage.

Although generally separate property is income or property acquired before marriage or after the marriage ends, an inheritance is your separate property even if you inherit the money during marriage.  Using your inheritance to start a business means that the business is your separate property because the funds used to start the business were separate property.  If only your inheritance is used in the business, your spouse has no claim to the business because the business is separate property.  However, if you invest community property funds in the business, the community is entitled to reimbursement and your spouse would have a claim representing that portion of the community property funds that were used in the business.  If a portion of the business assets are traceable to community property funds, then your spouse would have a claim for half of the portion of the community property funds that are represented by the assets.  This does not mean half the assets, but half the portion of community property funds that would be represented by a proportionate share of the assets.  Again, if no community property funds are invested in the business, then your spouse has no claim because the business is your separate property.


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