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 Montana, which is an equitable distribution state, property acquired by either spouse during the marriage is generally considered marital property and is subject to division upon divorce. However, property inherited by one spouse before or during the marriage is typically treated as separate property and is not divided between the spouses in a divorce. This includes real estate, money, stocks, bonds, art, jewelry, antiques, etc. Any increase in value of the separate property, such as appreciation of real estate or dividends from stocks, may be considered marital property, depending on the circumstances. Income generated from separate property, like rental payments, could also be treated as marital property. Spouses can alter the default treatment of such property and income through written prenuptial or postnuptial agreements. If separate property is commingled with marital property, it may lose its separate status and be considered marital property. For example, if inheritance funds are deposited into a joint bank account or if inherited real estate is held jointly, it may be subject to division upon divorce. It's important for spouses to maintain clear records and titles to preserve the separate nature of inherited property if they wish to prevent it from becoming marital property in the event of a divorce.