Does your partner have any claim to your inheritance during the divorce? No, spouses usually aren’t entitled to inheritance money in divorce proceedings. This is especially true if you keep your inherited assets separate from your marital ones.
Even when you have joint assets, you can protect your inheritance from your spouse by showing a judge that a specific portion of the mixed asset is your own separate inherited asset.
Contact a seasoned New York divorce attorney for advice on protecting your assets if you are getting divorced. Keep reading to learn more about the effects of divorce on inheritance.
Understanding Equitable Division
The judge in a New York divorce will allocate the couple’s property and debts between them fairly. Local state laws define this process as equitable division. It is essential to note that equitable division doesn’t necessarily mean that assets will be divided 50/50. Fair distribution is not necessarily a halfway split.
New York laws entitle your spouse to a portion of the marital property. All income you earned or acquired during the marriage applies to this law. However, if the judge determines that your inheritance is separate property, your inheritance will be safe during the divorce.
What Is Separate Property?
Separate property usually includes:
- Property spouses acquired before marriage
- Third-party gifts
- Some personal injury judgments
- Appreciation of a separately owned business asset
Any asset that a married couple acquires is considered marital property. Suppose you receive an inheritance from your late relative. If you file for divorce and the money is still in your individual bank account, then equitable division would not apply.
On the other hand, salary income is considered marital property and subject to equitable distribution whether it is deposited into a joint or separate bank account.
Can an Inheritance Be Considered Marital Property?
Inheritances are usually not considered part of the marital property and are, therefore, not subject to equitable distribution. It is essential to note that there are a few exceptions to this rule, including divorce agreements.
What If Both Spouses Are Beneficiaries?
Inheritances are considered joint property when both spouses are named as beneficiaries. If this is the case, your inheritance was never legally separate property but a joint asset. Therefore, the courts will use the equitable division principle to divide the money equally.
Mixing Marital Property With Separate Assets
The legal concept of “transmutation” refers to merging individual and marital property. When transmuted, an asset loses its separate asset status and cannot be identified or separated for distribution or classification.
Using your inheritance as a down payment on a marital home would make the inheritance funds indistinguishable from any other equity in the house. The inheritance money you used to buy the home could end up being considered marital property because of transmutation.
Remember mixing inheritance and marital property in a single account may make the inherited money marital. For instance, if you leave your inheritance in a shared savings account and never touch the money, you may be able to retain it.
You will need the assistance of a seasoned divorce lawyer familiar with inheritance rules to show that your inheritance money was kept separate from marital funds in a joint account.
Protecting Your Inheritance in a Divorce
It would be best to take the initiative to protect your interests because there are many ways to ensure that an inheritance does not become part of the marital estate. Some potential approaches for accomplishing this include:
- Including an inheritance as separate property in a prenuptial or postnuptial agreement
- Keeping records of the precise amount inherited
- Keep any records that show the inheritance was given to you specifically and not to both partners
- Keeping inheritance money separate from other money
- Putting inheritance into a trust
- Failing to add your spouse to the title of a real estate property
Hiring a divorce attorney can help you protect your inheritance from your spouse. Contact an experienced divorce lawyer in New York to discuss the risks and possible strategies for stopping a former spouse from taking your separate time.
Do not risk losing your rights by not navigating the process alone.
Time Is of the Essence
Marital assets may include the proceeds of inheritance made years before the divorce. In such a case, the inheritance’s value could be divided between the former spouses after their divorce.
If you or a loved one has recently inherited property, we can guide you on protecting the inheritance from being included in the marital estate.
Does Inheritance Affect Spousal Maintenance?
New York courts may decide to revise a spousal maintenance order if there has been a significant change in circumstances, such as a substantial inheritance.
If a client who is required to pay maintenance suddenly comes into a large sum of money due to the death of a loved one, the court may decide to increase the payments. On the other hand, the court may decide to lower or stop the recipient’s maintenance payments when the recipient gets a sizable inheritance.
We can advise clients on how the court might decide on a modification petition and fight against an ex-spouse who is trying to take unfair advantage of the situation.
Challenges Affecting the Growth of Inherited Assets
If an inheritance is considered separate property, the heir’s share of the asset’s income and appreciation is also considered separate property. If the heir uses the money to take care of their dependent spouse or if the development of their assets is because of their partner’s hard work, there may be some exceptions to the law.
Suppose you inherit an apartment building. The rental revenue from this inheritance is separate property. As long as you keep the money from that source distinct from your marital assets, it is your separate property.
A court will likely rule that your spouse is entitled to rental income and an equitable interest in the building if they contribute time, talent, and money to renovating the building, allowing you to increase rent.
The court must decide whether one spouse has an equitable stake in the other’s inherited property.
Consult a New York Divorce Attorney to Protect Your Inheritance
Divorce and inheritance laws in New York can be complex, particularly when it comes to the distribution of property. Contact the Douglas Family Law Group immediately to schedule a consultation with a skilled New York divorce lawyer.
We’ll examine the specifics of your case and advise you on how to best safeguard your inheritance and other separate property.
Call us today to schedule a confidential consultation.