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How Inheritances Are Handled in New Jersey Divorce

How Inheritances Are Handled in New Jersey Divorce

In the midst of a deadly pandemic and rising divorce cases, the question of how inheritances are handled in New Jersey divorces has increasingly cropped up. The short answer is that for the most part, an inheritance received by one spouse will not be subject to equitable distribution at the time of a divorce.

However, as with so many other aspects of New Jersey divorce law, there are exceptions.

Inheritances Received During Marriage

New Jersey is an equitable distribution state. What that means is any property or assets acquired during the marriage by either spouse is considered “marital property.”

NJ Rev Stat § 2A:34-23.1 is the state’s equitable distribution law. Equitable distribution does not necessarily mean a 50-50 split; it means a division of property, assets and debt based on what is most fair in light of the totality of the circumstances (both parties’ income, health, childcare roles, etc.).

All property needs to be classified as “marital” or “separate” before the court can determine whether it is subject to equitable distribution.

Inheritances, sometimes referred to as “gifts or devise,” are specifically singled out in the statute as being exempt from equitable distribution - even if acquired during the marriage or civil union.

However, there are cases when it can be subject to equitable distribution, particularly when it becomes intermingled with marital assets.

When Inheritance May Be Subject to Equitable Distribution

If you receive an inheritance from a parent or grandparent and then deposit those funds into a joint account with your spouse, it will be tough for the court to accurately determine where the inheritance ends and your joint funds begin.

Similarly, if you use some or all of your inheritance to buy marital assets (i.e., a home, car, etc.), those assets are going to become subject to equitable distribution.

For example, if your dad dies and leaves you $100,000 in his will, that money would generally be considered separate property - not subject to equitable distribution if you divorce. However, if you turn around and use that $100,000 to put a down payment on a home you share with your spouse, the value of that house is likely to be considered marital property.

Inheritances might also be deemed marital assets if the spouse’s name is put on the title, even if the property was an inheritance.

Note that even if an inheritance is considered separate, your spouse may be entitled to a portion of its value at the time of your divorce if he or she helped contribute to an increase in its value during your marriage. For example, if you inherit a home, but your spouse helps you remodel it with the use of marital funds, the added value increase would be considered marital property.

How to Shield Inheritance from Equitable Distribution in a New Jersey Divorce

Perhaps one of the best ways to shield inheritances from becoming subject to equitable distribution is with a prenuptial or postnuptial agreement. That will make it clear to whom the property/assets belong.

It’s also a good idea to avoid intermingling funds. Deposit your inheritance money or assets into a separate account that is only in your name and (if possible) that is solely for the purpose of the inheritance. Avoid adding your spouse to any title of property you purchase with inheritance money.

If your spouse seeks to establish that this property should be considered marital property, you will need an experienced East Brunswick divorce lawyer. We can help.

Call Rozin|Golinder Law, LLC today at (732) 810-0034 for a free and confidential consultation.