How Prenups Protect Your Inheritance in California

In California, your inheritance is generally treated as separate property, but that protection is not absolute. How inherited assets are handled, invested, or intertwined with your marital life can unintentionally create community property interests, even when that was never the intent.

Inheritance Is Separate (But It’s Not That Simple)

Under California law, inheritance is generally classified as separate property, meaning it belongs solely to the spouse who receives it and is not automatically split with the other spouse in a divorce. That’s the default rule. Family Code Section 770 expressly says separate property includes “all property acquired by a married person after marriage by gift, bequest, devise, or descent.” In plain terms, that means “inheritance.”

However, once inherited assets are used, invested, or combined with marital activity, the community may acquire an interest in the asset or its growth.

The following examples illustrate how this happens in practice.

Example 1: You Get Money From a Family Trust

Let’s say you’re a beneficiary of a family trust, and you receive distributions during your marriage. That money, standing alone, remains your separate property. It should be deposited into a separate account and kept completely segregated from marital funds.

In that scenario, there are usually no complications.

Problems arise only when those funds are later mixed, invested, or used in ways that implicate the marital community.

BEFORE getting married, what conversations about MONEY should you have with your partner?

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Example 2: Buying Real Estate With Your Inheritance

Suppose you use inherited trust funds as a down payment on a home or income-producing property purchased during marriage. Even though your inheritance is considered separate property, real estate acquired during marriage is presumed to be community property under California law.

While you may be entitled to reimbursement for your separate property contribution, the asset itself, and any appreciation tied to loan paydown or marital effort, may be treated as community property.

In most cases, your reimbursement is limited to the amount of your separate contribution, not a proportional ownership interest in the property’s appreciation, unless there is a written agreement stating otherwise.

This is exactly why prenuptial agreements matter. Without a clear written agreement, inherited funds can unintentionally bleed into the community estate simply based on how they are used.

Example 3: Working in a Family Business You Expect to Inherit

Another common issue arises when a spouse works for a family business they expect to inherit. In California, a spouse’s labor, skill, and effort during marriage are considered community property.

That means if you are devoting years of undercompensated work into that family business during the marriage, the community estate may have a legitimate claim to compensation for that effort, even if the business itself was originally separate or later inherited.

The Court will focus on whether the community was adequately compensated for the spouse’s labor during marriage. If not, the non-working spouse may assert that the community is entitled to reimbursement or an interest tied to that uncompensated effort.

Without a prenuptial agreement addressing this issue, disputes over business interests and inheritances can be complex, expensive, and unpredictable.

Prenups Provide Clarity and Protection

When it comes to inheritance, a prenuptial agreement empowers you to:

• Define ahead of time what is separate and what is community.
• Protect inherited assets from being inadvertently converted into community property.
• Specify how financial contributions or labor during marriage will be treated if you later separate or divorce.

A well-drafted prenup can make it absolutely clear that your inheritance remains separate, regardless of how it is invested, used, or connected to a family business.

How Inheritance Can Impact Spousal Support

Even when inheritance remains separate property, it can still influence spousal support in a California divorce.

Under California law, courts look broadly at each spouse’s income, assets, and overall financial circumstances when determining spousal support. While a spouse’s inheritance is generally not divided as community property, it may still be considered as part of that spouse’s ability to pay or financial resources, particularly if the inheritance generates income or is regularly used to support the marital lifestyle.

For example, if inherited assets produce rental income, investment income, or trust distributions that are relied upon during the marriage, a court may factor those amounts into a spousal support analysis. In some cases, courts have also looked at whether a spouse has access to substantial inherited assets when evaluating need or ability to pay, even if the principal itself remains separate.

BEFORE getting married, what conversations about MONEY should you have with your partner?

Use this guide to discuss budgets, assets, debts, goals, joints bank accounts and more.

Get the guide

How a Prenup Can Limit Spousal Support Exposure

A prenuptial agreement can significantly narrow how inheritance is treated for spousal support purposes.

With a properly drafted prenup, couples can:

• Specify that inherited assets and trust distributions are excluded from income for spousal support calculations
• Limit or waive spousal support altogether, subject to California’s enforceability rules
• Clarify that passive income or distributions from separate property inheritances will not be used to fund post-separation support

Without these provisions, a spouse with a significant inheritance may find that, while they keep the asset, they are still exposed to ongoing financial obligations tied to it.

In short, inheritance may be protected from division, but without a prenup, it is not automatically protected from spousal support scrutiny. A thoughtful prenuptial agreement allows couples to address this issue directly, transparently, and on their own terms rather than leaving it to judicial discretion later.

Best Practices to Fully Protect Your Inheritance

Here are some tips, straight from what I tell my clients when they want to keep inheritances separate:

1. Have a prenup talk early and be open, honest, and transparent about wanting to keep inheritances separate.
2. Keep inherited funds in accounts titled only in your name for distributions and not mixed with any community funds until you have a clear plan.
3. Consult with a prenuptial agreement attorney early, so you can define expectations upfront and clearly outline them in the agreement.

Final Word on Prenups and Inheritance

California’s default laws do recognize inheritance as separate property, but that protection isn’t bulletproof. What you do with the money, how you mix it with marital assets, and how you contribute your time and skills during marriage can all influence whether the inheritance stays yours.

Prenuptial agreements give you control. Without one, you’re leaving too much up to critical financial statutory defaults and judicial interpretation. And if you’re planning to inherit anything of substantial value, a prenup is not just advisable, it’s strategic.

To create a prenuptial agreement that aligns with your inheritance and marital goals, schedule a session with me. Together, we’ll ensure your agreement is clear, comprehensive, and tailored to your situation.

P.S. Not in California? Take a look at this list of community property states that may follow similar guidance on inheritance.