Divorce FAQ's
1. Are inheritances subject to equitable distribution?
In most instances inheritances are not subject to equitable distribution in a divorce case. The “black letter” answer to this question is that all property, real, personal or otherwise, that is acquired during the marriage by either party by way of an inheritance is not subject to equitable distribution. Moreover, N.J.S.A. 2A:34-23 specifically excludes from equitable distribution all gifts, inheritance and intestate distributions received by either spouse from a third party.
Generally an inheritance is not subject to distribution in a divorce. However, it is very important that the inheritance be kept segregated and not intermingled with the marital funds. If any part of an inheritance is placed in an account wherein you also deposit marital earnings, then the entire account will be distributed by a court in a divorce. The court will take into consideration that a portion of the monies represented an inheritance in determining the percentages to be allocated to each spouse. However, if the inheritance is always kept separate and apart from the marital funds, then the court will not distribute any portion of it to your spouse. In summary, it is important to always try to have an inheritance classified as “separate property.” “Separate property” is property that is not part of the marriage as a whole. Instead, the separate property belongs solely to the wife or the husband.
2. If I received an inheritance before I got married, then is it clearly my property?
In many marriages one spouse comes into the marriage with some wealth that was acquired by an inheritance. The best option to safeguard these assets is to have a prenuptial agreement prepared and executed. The prenuptial agreement should specifically delineate that the inheritance proceeds are premarital assets, and that they are not subject to equitable distribution. This is the best alternative to protect inheritances from being dissipated in the event of a nasty divorce.
Many couples for whatever reason are averse to executing a prenuptial agreement. I always advise my clients that we are not living in the 1950’s or 1960’s anymore, and that the divorce rates are about 60%. Some clients heed my advice. Meanwhile, many of my clients ignore my advice and it goes in one ear and out the other. If a spouse enters into a marriage with a substantial inheritance, and if he or she does not want to execute a prenuptial agreement, then the second best alternative is to keep separate your marital monies and your inheritance. You should place the inheritance into an account solely in your name, and keep these funds in that account separate from all marital funds.
It is important to emphasize that if you deposit any marital funds into an inheritance account, then you could convert the inheritance funds into marital property. It is also important to emphasize that if you use any part of the inheritance to purchase marital property then the funds will also be classified as marital funds. For instance, if one spouse uses her inheritance to purchase a marital home, then the funds that were used to purchase the home are converted into marital funds.
3. What would happen if I put my inheritance into our joint checking account, just for a few days, while I opened up my own bank account? Is the inheritance still considered “separate property?”
This could be a disaster. It is always advisable to keep an inheritance separate and apart from any marital funds. Some courts may hold that the simple act of placing the “separate property” into a joint account has changed it to marital property. Meanwhile, another court may hold that part of the joint account consists of marital property, and that the other part of the account is “separate property.” The key issue at any hearing would be whether you can demonstrate that the funds were placed in the joint account only for banking purposes, or safekeeping, and that the inheritance funds were never intended to be used for marital purposes, and were never used for marital purposes. If a spouse can satisfy this burden of proof then the court most likely will classify these funds as “separate property.”