Divorce can be stressful on many levels. When you are preparing to file for divorce, the last thing you need is anxiety about part of your family inheritance going to your spouse. As an equitable distribution state, New York allows for separate property to be kept by each spouse following divorce. Only marital property is divided. Unfortunately, though an inheritance is considered separate property, under certain circumstances, it can become marital property, and thus subject to asset division.
In order to be able to keep your inheritance after divorce, you must be able to prove to the court that it has remained separate from your marital property. If you were unaware of this when you received the inheritance, you may have made some mistakes that can complicate your situation during the divorce process. However, a savvy New York divorce attorney can always help to minimize the risk of losing part of your inheritance.
Marital property includes all income and assets acquired throughout the marriage. It doesn’t matter who earned the income or whose name is on the title of properties acquired during the marriage. It remains marital property.
Marital property is the reason Jeff Bezos had to split his multi-billion-dollar fortune with his ex-wife MacKenzie Scott, because he built Amazon from the ground up while married to her, and thus it was considered marital property. This happened because Washington is an equitable distribution state, just like New York.
The category of separate property, which is not subject to division, includes property, investments, and cash you owned before getting married and personal injury compensation, gifts, and inheritances obtained during the marriage, among other types of assets.
If Bezos had inherited his multi-billion-dollar fortune while married to Scott, and had kept them in a separate bank account, he wouldn’t have had to split them with his former spouse.
What Is Considered Marital Property in New York?
Marital property may include:
- Real estate purchased during the marriage, excepting separate property contributions to said purchases (for example, using separate property funds to cover a down payment)
- Personal property (artwork, motor vehicles, airplanes, boats) purchased during the marriage
- Bank accounts, cash, securities, pensions, and retirement accounts acquired throughout the marriage
- Gifts exchanged between spouses
- Advanced degrees and permits to enter into a specialized business
What Is Considered Separate Property in New York?
- Inheritances and gifts (except gifts exchanged between spouses) obtained during the marriage
- Real estate you acquired or owned before getting married
- Personal property you acquired or owned before getting married
- Personal injury compensation received during the marriage, except compensation related to loss of earning capacity/wages
- Property designated as separate property in a prenup, postnup, or another type of agreement
- Property acquired in exchange for separate property during the marriage
- The increase in the value of your separate property as long as you and your spouse made no contributions during the marriage resulted in that increase.
Inheritance in Divorce
When you file for divorce, if you don’t agree about asset division, New York courts will determine what is the marital estate, also known as “the marital pot.”
During the marriage, it is important not to add anything you want to keep for yourself into the marital pot. For example, if you inherited valuable securities and deposited them into a jointly owned investment account, courts will likely consider this to be marital property, and you will lose part of your inheritance during the divorce. The same will happen if you inherit money and use it to purchase real estate where you and your spouse share title; your inheritance will become marital property.
If you cannot settle and go to trial, the court will decide what is marital property and what is a fair division of the marital estate. The division is not always 50/50, as New York courts may consider different aspects.
Factors Taken Into Consideration to Divide an Inheritance
If an inheritance has been commingled into marital property. Courts will consider the following factors before deciding as to who is entitled to what percentage of the inheritance.
- Each spouse’s income and property at the beginning and end of the marriage
- Marriage length
- The two spouses’ age and health status
- If the spouses have underage children, the children’s and custodial parent’s needs (for example, if they need to live in the primary marital residence)
- How the divorce affects each spouse’s pension rights and inheritances
- Contributions to marital property made by a spouse that has no title to it (for example, one spouse supporting the other while they earn a potentially lucrative degree)
- Whether the marital property is liquid (easy to sell and convert into cash) or not
- Whether either spouse will lose health benefits as a result of the divorce
- Projected child support and alimony payments
- Expected financial circumstances for each spouse’s future
- The difficulty of assessing the value of complex assets
- Whether it is best for the health of a jointly owned business to award it to one of the spouses rather than dividing it
- Whether one of the parties had used up part of the marital property before the divorce was finalized
- Whether one of the spouses tried to conceal or dispose of assets at less than market value in preparation for the divorce
- Tax consequences of the split for each spouse
Courts may also consider factors not included in this list if their consideration contributes to reaching a fair decision.
Strategies to Protect Your Inheritance from Divorce
If you want to keep your inheritance as separate property, you should act now. Effective ways to protect your inheritance include:
- Prenuptial and postnuptial agreements stating that a specific inheritance is considered separate property
- Keeping any documents relating to the inheritance and stating its exact value
- Keeping inherited real estate in your name and not adding your spouse to the title
- Keeping your inheritance in a separate account
- Placing inherited assets into a trust
Inheritance in Divorce Attorneys New York
Many of the rules about inheritance division in divorce are not set in stone. There are complexities and nuances only an experienced divorce attorney specializing in inheritance issues can navigate.
Our firm has been providing comprehensive counsel to New York State residents on inheritance and marital asset division issues for many years. Our team of forensic accountants, litigators, and investigators can help protect your assets during the most complex divorce proceedings. If you are planning to file for divorce or recently received an inheritance and are looking to protect it in the event of a potential divorce, contact us today. Our inheritance in divorce specialists can help.