Is your spouse entitled to your inheritance? No, generally your spouse is not entitled to your inheritance money in a divorce. This is particularly true if you did not mix your inherited assets with your marital assets. If you did mix or commingle assets, then your spouse is still not entitled to a portion of inherited funds if you can prove to a judge definitively that a certain portion of the mixed asset is your own separate inherited property.
What Is Equitable Division?
In a New York divorce, the court will divide marital assets and debts between the parties based on principles of fairness. The law refers to this process as “equitable division.” Note that equitable division does not always equate to 50/50.
The law entitles your spouse to a share of marital property. This applies to all income and assets you acquired during the marriage. However, pursuant to inheritance divorce laws, the court will not disturb your inheritance if the court classifies it as separate property.
What Is Separate Property?
Separate property generally includes:
- Property acquired before the marriage,
- Inheritances,
- Third-party gifts,
- Certain personal injury judgments, and
- Passive appreciation of a separately owned business asset.
Marital property is everything else acquired during the marriage. For example, the equitable division is not appropriate if you inherit $10 million from your late uncle and, upon filing for divorce, you still have the funds in your separate bank account. In comparison, your salary income deposited into either a joint or separate bank account is marital property and thus subject to equitable distribution.
Can My Inheritance Become Marital Property?
Inheritances are normally not part of the marital estate and thus not subject to equitable division. However, you should be aware of some important exceptions regarding inheritance and divorce settlements.
A Joint Gift
When the gifted inheritance names both parties as recipients, courts will classify the inheritance as marital property. In this scenario, your inheritance was never truly your separate property. Thus, courts will distribute the funds fairly under the equitable division principle.
Related:
Who Gets the Rental Property During a Divorce?
Commingling of Inherited and Marital Assets
Transmutation is a legal term referring to the mixing of separate and marital assets. Each item becomes unidentifiable and inseparable for purposes of classification and distribution when it is transmuted. For example, if you used your inheritance for a down payment on the marital residence, those funds become indistinguishable from other equity in the house. Thus, transmutation occurs, and the inheritance money you put toward the house MAY become marital property.
Note that mixing marital funds and your inheritance in a single account generally makes the inherited funds marital only when it is impossible to trace the separate funds. For example, in some instances, you may be able to retain your inheritance if you simply left the funds undisturbed in a joint savings account and never made withdrawals. But you will likely need an attorney experienced in inheritance divorce laws to help you prove that your inheritance money remained separate from marital funds in a joint account.
Trust an Expert to Protect Your Inheritance in Divorce
Navigating inheritance divorce laws in NY can be confusing, especially those addressing the transmutation of assets. For a free consultation with a knowledgeable New York divorce attorney, contact the Stepanian Law Firm today. We will evaluate your case and help you determine the best course of action to protect your inheritance and separate property.