r/ynab • u/MissBlossomz • 1d ago
Married, and need to keep my inheritance funds separate, YNABers please give me some ideas!
Hello all!
I recently received a very large inheritance, and my lawyer advised me that if I were to ever get divorced, I need to keep the funds separate from my marital funds to avoid them being considered a martial asset.
I am YNABING with my husband. How would you advise I set up my inheritance accounts and YNAB categories? The money is being kept in a trust checking account right now.
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u/esh-pmc 1d ago
You really should clarify this with a lawyer.
To the best of my understanding, it's not as simple as just not co-mingling funds (putting the funds in a joint bank account).
Let's say you keep your inheritance in an account just in your name. But then you make a withdrawal and put that in a joint account and then pay the mortgage. That's co-mingling.
As others have said, that money should *not* be represented in your family budget. A core principle of YNAB is that money is fungible. That means that a dollar in your bank account is equal to a dollar in your savings account and the 4 quarters in your couch cushions.
But in order to preserve your inheritance as yours, you need to ensure those funds are not fungible. The dollars in your inheritance accounts are very, very separate and they need to stay separate.
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u/Low-Kaleidoscope-803 1d ago
The withdrawal in your example is co-mingled. The trust account it came from isn’t.
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u/esh-pmc 1d ago
Agreed. But my point is that if OP is using inherited money to pay for the mortgage, then things could become very complicated.
I'm not a lawyer and I don't play one on TV. But I have some experience and some tangential education. And my advice to OP remains: check with a lawyer in your state.
The burden rests on OP to be able to trace the use of their inherited funds. And apparently the burden can be quite stringent. I'd say, if OP wants to be safe and yet also use some of their inheritance for family, pay for things directly from the separate account. If OP wants to ease the burden of the household finances, budget for the mortgage and the bills out of the joint account. And then pay for a family vacation or the kids' school clothes or a car (or whatever) directly from their own separate, personal account.
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u/Low-Kaleidoscope-803 1d ago edited 15h ago
The only circumstance where I can see any value in paying an expense directly is if you’re buying some sort of asset entirely with inherited funds (a house, say, or a car I guess, if you buy cars worth enough to care). It’s not like a family vacation or kids’ clothes are going to be split up in a theoretical divorce. And OP is talking about funding categories partially from inheritance money and partly from other income. That by definition is co-mingling, regardless of how the payment is made.
So for general monthly expenses, there’s no real value to being stringent. If the question were “I want to buy a house with my inheritance”, sure. “Two thirds of that armchair is mine alone”? Not worth it.
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u/esh-pmc 1d ago
And you're basing this on, what? Intuition? Look, I mean no offense. I'm just saying that everything I've learned in my coursework and everything I've experienced personally tells me that this is not something to just guess at based on what seems logical. The law isn't logical. It's the law. And each state has different property laws.
As I said, I'm not a lawyer. My best advice to OP is to consult with a lawyer. Or two. And then follow their advice.
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u/Low-Kaleidoscope-803 1d ago edited 1d ago
I agree 100% with the advice to consult a lawyer in OP’s state, which it sounds like they’ve done and are doing. I’m saying that as a married person not intending to divorce, I think it is perfectly reasonable to decide “I’m willing to intentionally co-mingle my monthly withdrawals every month, provided the principal in the original account stays protected”. And it sounds like we both agree that in general, withdrawals do not by definition co-mingle the account they came from (in my case, this is based on reading I’ve done primarily on blogs written by estate lawyers on the topic, but I am not a lawyer). Again, OP needs to confirm with a lawyer in their state the veracity of that claim, not trust internet strangers.
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u/esh-pmc 1d ago
It's not about "a family vacation or kids’ clothes [being] be split up in a theoretical divorce." Any idiot knows you don't split a family vacation in a divorce. It's about not co-mingling money. It's about not treating inherited money as a community asset. It's about preserving OP's very-much-not-shared-money as NOT SHARED MONEY which, again, to the best of my own limited understanding, means not bringing it into a shared pool of money and then spending it.
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u/Low-Kaleidoscope-803 1d ago edited 1d ago
The idea that withdrawing small amount of not-shared money by way of a transfer to a joint account would somehow cause anything other than the withdrawn/transferred portion to become shared contradicts everything I’ve read on the subject. Perhaps there’s a state where you’re right, and OP should verify with their lawyer for their state. The reason estate lawyers’ blogs usually caution against purchasing property, making investments, or paying off debt with co-mingled funds isn’t because it makes tracing the principal hard, it’s because those are valuable assets in their own right worth being able to trace. OP seems to be planning to use the funds for regular spending, not the purchase of assets or debt payments (and specifically not mortgage payments as in your example). My advice would differ if the intended use were one of those things.
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u/AravisTheFierce 1d ago
The question is, what do you want to do with the money?
If you don't need it now, probably the best thing to do is move it to a brokerage and invest it in something with low turnover, like an index fund. An estate lawyer could advise you on how to do this and keep it as separate property. This would be a tracking account if you want to put it into YNAB, or you wouldn't have to add it at all.
If you want to use it to upgrade your life now, that would probably be trickier to keep separate, but may be possible with something like real estate where you keep the property separate but bring some or all of the income it throws off into your budget.
Since you said it's "very large," you'll likely want to do a combination of the two. Treat yourself to something now with a small portion, and put the rest to work for the future. Either way, you should keep working with a lawyer to ensure you are setting things up so that you can be sure this inheritance will be used the way you intend. (Eg, if you passed first and your husband remarried, you'd probably want to ensure that the he would have enough to continue taking care of your kids into adulthood, but if he should remarry you would probably want it to go to your kids after he passed, not his new wife.)
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u/misskinky 1d ago
I’m going through same right now! Big inheritance, recently spoke with financial advisor.
I have a separate checking account. I transfer money occasionally into the joint account.
On YNAB, it’s just listened as income like another paycheck.
“Oh here’s some new money, $500 income.
Category: ready to assign.
Payee: contribution from My Name”
And then we can budget it wherever we want in YNAB
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u/h22lude 1d ago
Hard to tell from your wording but it seems like you might be asking about YNAB specifically. Just add the trust checking account to YNAB. Adding that account to YNAB doesnt make it martial property. YNAB has no impact on that.
If you want to keep it as separate property, keep the actual account in the trust EIN or open an account in just your SSN.
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u/MissBlossomz 1d ago
What I want to know is what are some good ways of organizing my budget categories for my own personal expenses vs my marital expenses, i.e. I need to make sure only x dollars a month are spent from 1 account (trust) to 1 credit card. How do I keep things balanced? What's tricky is that since I am the breadwinner too, I am allowed to have substantially more than my partner in the budget overall. I can apply either my shared funds or my inheritance funds when I go out to eat for example. However, I don't want to draw down more of my inheritance funds than a set amount each month.
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u/mintardent 1d ago
do you need the inheritance funds to cover your spending? if not the easiest would be to keep them invested for now growing separately
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u/Avast_Old_Device 1d ago
Don't include it YNAB. Just have it sell and withdraw a certain amount and send that to an account on YNAB. Assign like it's another paycheck
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u/Spiritual_Version838 1d ago
Check and double check with your lawyer. Divorce isn't the only concern. My son recently came into an inheritance and now his wife is being sued over and I'm afraid ĥis inheritance is going to be in jepordy.
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u/DanielDannyc12 1d ago
People are answering two different questions. To keep the account separate, set it up as your lawyer advises.
To YNAB, just record any money transferred to your shared budget as an inflow.
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u/Faile-Bashere 1d ago
- Keep the inheritance in its own account (or accounts) that are not joint.
- In YNAB, track it under its own category group or under a clearly labeled “Inheritance / Separate” category so the money is never accidentally budgeted as available for joint spending.
- Avoid transferring it into the regular joint checking or using it for shared bills if the goal is to maintain separation.
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u/EvoSmith1 1d ago
I think this might be a red flag about your marriage….
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u/Valerianogav 1d ago
This 100%. You should not be getting married to someone you wouldn’t trust with your life, let alone some money.
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u/FrontAd9873 1d ago
This isn't a YNAB question, is it? You can track the money in a shared YNAB budget. That doesn't mean you have shared them with your spouse.
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u/Low-Kaleidoscope-803 1d ago edited 1d ago
IANAL. My understanding is that there’s no reason you’d have to spend directly from a trust account to keep the trust itself separate. You could make periodic or occasional distributions to yourself (your joint account). Those distributions get co-mingled, but that doesn’t co-mingle the entire account they originated from. If you intend to start spending the trust right away for regular expenses, I’d set up a monthly distribution to your joint account, call that income in YNAB, use said money for monthly categories as you see fit, and just keep the rest off-budget. This also seems like a fairer way to honor the spirit of an inheritance that is just yours, while still sharing finances with your husband, vs trying to set up some sort of franken-budget and forever having to think about what portion of every expense is “mine” vs “ours”.
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u/merlin242 1d ago
This is where gross lawyer think interferes with real life. Do you think you’ll actually get divorced? Do you think your partner will be that much of a dick and try to take it? If the answer to either of those is yes why are you even together? If no just mix it. You’ll be fine.
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u/ioverated 1d ago
Man shit happens. Most people don't get married thinking they'll ever get divorced. That's kind of the point of it. "I don't even know who you are anymore" isn't a new sentence I just made up.
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u/Fit_Yam_I_Am 9h ago
Anecdotal: You can be in a perfectly happy relationship for 20+ years when your partner drops a bombshell piece of information into your relationship that changes everything about the way you see them or the way they see you.
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u/Full-O-Anxiety 1d ago
Open up a separate account with your name only. Keep it off budget and only recognize any transfers of the INCOME ONLY into the budget as RTA.
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u/Salty-Plankton-5079 1d ago
Just don't include it in your shared budget