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 New Mexico, which is a community property state, property acquired by either spouse during the marriage is generally considered community property and subject to division upon divorce. However, property inherited by a spouse, either before or during the marriage, is typically treated as that spouse's separate property and not subject to division. This includes real estate, money, stocks, bonds, art, jewelry, antiques, and other personal property. Appreciation of separate property and income generated from it, such as rental payments or stock dividends, may be considered community property unless there is a prenuptial or postnuptial agreement stating otherwise. It is crucial to note that if separate property is commingled with community property, such as depositing inheritance funds into a joint bank account or titling inherited real estate jointly, it may lose its separate property status and become subject to division upon divorce. An attorney can provide specific guidance on how to maintain the separate nature of inherited property and draft any necessary agreements to protect such assets.