Is Inheritance Considered Marital Or Separate Property Under NY Law?
Inheritance is generally considered separate property, but is considered marital property once it is placed into a non-segregated account that already contains marital property. What does this mean?
Imagine you have a checking account with $10,000 in it. You inherit $100,000 from an Uncle and deposit it into your checking account. If this checking account contained marital money (that is, any money that either you or your spouse earned from any source during your married life), you have now co-mingled those funds.
This now makes your inheritance marital property, subjecting it to equitable distribution in the event of a divorce. This means a Judge could award anything from 0% to 50% or more of your inheritance to your spouse in a divorce.
If you want to truly protect your marital property, you must set up a completely segregated, new account for your inheritance. Then, keep these assets wholly separate from any other income or revenue to prevent them from being commingled.
What Mistakes Do People Make That Cause Their Inheritance To Become Shared Property?
The number one mistake people make is co-mingling their inheritance. Most people instinctively assume that if only their name is on the checking account, savings account, or investment account, anything in that account is “theirs”. But New York law doesn’t view it this way.
New York law doesn’t consider whose name is on an account or even a deed or title. Rather, it considers whether that asset was acquired or accrued during the time you were married. If so, the asset is presumptively marital, and the burden is on you to prove that the asset is separate property. And if you have co-mingled or joined marital funds with separate funds, you will likely lose if you try to claim those assets as separate.
The best thing to do if you have pre-marital funds, inherited funds, or other separate property (such as awards from a lawsuit) is to keep that money in a segregated account and keep it wholly separated from any marital funds. You could also simply have a prenuptial agreement drawn up, which may be more cost-effective and less complicated in the long run.
How Can A Pre-Nuptial Or Post-Nuptial Agreement Protect My Inheritance?
Pre-nuptial and post-nuptial agreements can be drawn up to protect a wide range of assets from division in the event of a divorce. Your agreement may stipulate that any inheritance from relatives is deemed separate property. You can do the same with houses, condos, bank accounts, investment accounts, and retirement accounts. You can even protect assets once you’ve co-mingled them with post-nuptial agreements.
For example, say you inherit $250,000 from your Aunt, and you unwittingly place it into your checking account that already contains marital property. A post-nuptial agreement can be drawn up and signed stating that this $250,000 is now carved out of the marital pot and is deemed to be your separate property. This will make it ineligible for equitable division should you divorce, allowing you to keep the entire amount.
Attorney David Bliven is a determined, skilled divorce attorney serving Westchester County, New York. Since 1998, he’s helped clients just like you understand their legal options and protect their inheritance during a divorce.
Have questions, or in need of quality legal guidance? Reach out to the Law Offices of David Bliven for an initial consultation today.
What Documentation Do I Need To Prove My Inheritance Is Separate?
You will need estate documents such as the will and the actual award of the asset from the surrogate’s court if the asset has gone through probate. Otherwise, if the will is simply administered through an executor, both the will and a testimonial affirmation from the executor will be required.
This affirmation will attest that you, and only you, inherited the asset and that the asset was distributed to you on a given day by the executor. Finally, you will match up the asset’s value to the deposit of that asset into your account.
How Should I Handle Inherited Real Estate In A Divorce?
You will have to provide the will, a letter from the executor verifying you solely inherited the property on a given date, and the deed. If the property went through probate, you will need to provide documentation of distribution from the surrogate’s court. As long as you did not put your spouse on the deed, the general rule is this property remains your separate property.
What If I’ve Already Co-Mingled Some Of My Inheritance?
If you have already co-mingled some of your inheritance, you may be able to present a “convenience defense.” This is a rarely applied defense, but can be used to argue that you had no other choice but to mingle the assets. For example, perhaps your shared checking account was all that was available at the time, and you had no intention of making it a marital asset. More commonly, a person deposits the inheritance into an existing account which just has their name on it. The less funds in the account at the time of the inheritance deposit, the less money subsequently going into the account, and whether it was proximate to the filing of the divorce are among the factors considered in establishing the “convenience defense.”
You may have to match that defense with corroboration of the fact that you already saw your marriage heading towards a divorce at that point and assumed the assets would be split anyway.
How Do I Explain Inheritance-Related Boundaries Respectfully To My Spouse Without Causing Conflict?
Whether you live in White Plains or East Hampton, explaining these matters respectfully and in a way that minimizes conflict can be incredibly challenging, as divorces are already emotionally charged and complex. Frankly, it is best to get your lawyer involved in this issue. Keep in mind that any discussions you try to have with your spouse in private on this matter could be recorded by them and used against you later.
If you do have these conversations with your spouse, it is best to qualify such a discussion by opening with “Here are my thoughts” or “Here is what I am leaning towards” and make it clear to them that you will be discussing your idea with your attorney before you commit to anything in terms of a settlement.
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