If a spouse inherits real property (real estate) or personal property (money, stocks, bonds, art, jewelry, antiques, etc.) before or during marriage, it is generally separate property (not marital property) and is not subject to division upon divorce in equitable distribution/common law property states or in community property states. But any appreciation or increase in the value of such separate property (e.g., real estate, stocks) and any income from such separate property (rental payments, stock dividends) may be marital or community property—unless the parties agree otherwise in a written prenuptial or postnuptial agreement.

An important exception to this general rule is the situation in which separate property from an inheritance is commingled with marital or community property—by placing funds from both sources in the same bank account, for example, or holding (titling) real estate from both sources in the same entity (limited liability company, family limited partnership, etc.).

In Kentucky, which follows equitable distribution laws, property acquired by either spouse during the marriage is generally considered marital property and subject to division upon divorce. However, property inherited by a spouse before or during the marriage is typically treated as separate property and not subject to division. This includes real estate, money, stocks, bonds, art, jewelry, antiques, etc. If the inherited property appreciates in value, the increase in value and any income generated from it, such as rental payments or stock dividends, may be considered marital property, unless there is a prenuptial or postnuptial agreement stating otherwise. A key exception occurs when inherited property is commingled with marital property, such as depositing inherited funds into a joint bank account or holding real estate in a joint entity. In such cases, the inherited property may lose its separate status and become subject to division upon divorce.