Liz Weston

Dear Liz: You recently told a husband who wanted to spend his wife’s expected inheritance that the money would be her separate property. Is that true of all states or just community property states like California? Even if it can be kept legally separate, should it be? Isn’t it better for couples to share their money?

Answer: Inheritances and gifts are considered separate property in every state. Where community property and equitable distribution states differ is in how other assets and debts acquired during marriage are treated.

For inheritances and gifts to remain separate property, though, a recipient must be careful not to commingle them with joint funds. Recipients would need to keep such windfalls in separate bank or brokerage accounts in their names alone, for example, rather than storing the money in jointly held accounts, using it to improve a jointly owned asset such as a home or paying down a joint obligation such as a mortgage.

Why would people want to keep funds separate? There are good reasons, even in marriages where all other money is shared. The couple may divorce, or the wife could die before her husband. If she commingles her inheritance with joint funds, the money her mother intended her to have could ultimately get spent by her husband’s next wife.

The wife may well decide to share some or all of her windfall with her husband. But she shouldn’t be pressured or bullied into doing so, especially with the notion that it’s the “right” thing to do. She would be smart to talk — alone — to a fee-only financial planner who pledges to put her interests first before she makes any decisions about the money.