Are inheritances protected in divorce? Is my inheritance protected in divorce? How do I go about protecting inheritance in divorce? Can your spouse take your inheritance in a divorce? Is an inherited IRA protected in divorce? Is a spouse entitled to inheritance money? What about an inheritance and divorce settlement? This blog will shed some light on how to protect your inheritance from your divorce.
HOW TO PROTECT INHERITANCE FROM DIVORCE
To protect your inheritance from a divorce, first we need to make sure that it is not a marital asset. A marital asset is defined under NJ law as all property, both real and personal, which was legally and beneficially acquired by either you or your spouse or both of you during the marriage. That means that regardless of how an asset is titled, if you or your spouse or you both acquired the asset between the date of your marriage and the date someone files for divorce, then it is considered a marital asset. That is the general rule. However, there is a significant exception to that rule and that is that any property acquired by either party through inheritance or gift is not a marital asset or subject to equitable distribution. So, if you received any property through a gift or inheritance during your marriage, it is yours and yours alone and will be considered separate property and exempt from equitable distribution as long as you protect it.
You can protect your inheritance from a divorce ONLY if you don’t comingle it with marital assets. If you mix inherited money, for example, with a bank account you started during the marriage – even if that bank account is in your name alone – you have destroyed the separate nature of the inherited money and it then becomes fair game for distribution in the marriage. Let’s say for example you inherit $5,000 and you open a bank account in your separate name and deposit that inheritance into that account. That account and the funds in that account are yours alone and are not subject to equitable distribution in the divorce.
To keep inherited property or gifts acquired during the marriage protected in divorce they must be kept separate. This means that any property inherited, or gifts received during the marriage have to be kept in a separate bank account. But let’s say after you open that bank account in your separate name and deposit that inheritance into that account, you decide to deposit $100 per month from your paycheck into that same account to accumulate savings. You have again then destroyed the separate nature of that account and the inherited money by comingling exempt money with marital money. Remember, any income you earn during the marriage is marital and cannot be comingled with exempt assets unless you wish to destroy the separate nature of those assets.
Your IRA is protected inheritance from divorce without question. But make sure that the account is only in your name and that you do not deposit into that IRA account any property or assets you accumulated during the marriage including any income you earned during the marriage.
Any divorce settlement should clearly identify the exempt, inherited assets as yours and yours alone along with a waiver from your spouse that they have no interest in that asset. But be mindful: income from an inherited asset is includable in your income for purposes of determining support. This means that a court will impute income on any inherited asset to you that will be added to your income for purposes of determining support, whether you earn an income on that asset or not.
Protecting inheritances in divorce can be tricky. Mistakes are easy to make rendering that nest egg unwittingly part of your divorce. Choose an attorney with the experience and skill to protect your interests. Call us today for a consultation.