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 is segregated and not intermingled with the marital funds. If any part of an inheritance is placed in an account where marital earnings are also deposited, then the entire account will be distributed by a court in a divorce. The court will consider 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 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 to the husband.
2. If I received an inheritance before I got married is it clearly my property?
Many spouses come into a 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 any more, and that divorce rates are now about 60%. Some clients heed my advice. Meanwhile, other 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 the marital monies and the inheritance separate. You should place the inheritance into an account solely in your name and keep these funds separate from all marital funds.
It is important to emphasize that if marital funds are deposited into an inheritance account, the inheritance funds could be converted into marital property. It is also important to emphasize that if any part of the inheritance is used 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 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 the funds as separate property.
