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Keeping certain people from getting inheritances

May 17, 2017

 

Newsflash: Sometimes there are people we don't like. Or maybe it's just one person we don't like. Like your son-in-law, perhaps.

 

Luckily, if your daughter is married to someone you don't like or trust, you can still feel safe in leaving substantial assets to her upon your passing. Even though California is a community-property state, inherited property is generally automatically considered the separate property of the person inheriting it, regardless of whether that person is married. So if you leave $300,000 cash to your daughter upon your passing, her "we never liked him" husband will have no legal claim to it.

 

Not only that, but if she uses that $300,000 to buy something else -- like an investment rental property -- that new asset will also be her separate property (as long as the purchase of it can be traced to the inherited $300,000).  

 

And to further stick it to your son-in-law, any rental income she earns from that rental property will also be her separate property, because income earned from a separate-property asset would also be considered separate property.

 

One disclaimer: Your daughter could transmutate* any of her separate property into community property at any time. If she did that, her husband would then have an undivided half interest in it. But that's something that's completely beyond your control.

 

* The transmutation of property is something unique to community-property states like California. It involves changing the character of property from:

- separate property to community property,

- community property to separate property, or

- separate property of one spouse to separate property of the other

 

 

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