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Monday, December 1, 2014

Retaining Inheritance During New York City Divorce

Marriage is about sharing almost everything, and that includes the generous gifts received by close relatives.

However, when a relationship starts to crumble, this view can be significantly altered. By then, it could be too late to retain inherited assets, such as vacation homes, heirloom jewelry or other gifts - even when it's clear those assets weren't ever supposed to go to a spouse in the first place.

The determination for what is considered marital property versus what's considered separate property varies to a great degree depending on the state where you live. Generally, the goal for the person who directly inherited the item is to work to have the inheritance considered separate property, while the goal of the other person is to have it lumped into marital property. In the end, the inheritor may still keep the item/money/home, etc., but the value will be considered when divvying up the other assets and debts.

Our New York City Divorce lawyers recognize, generally speaking, assets acquired during marriage through inheritance are usually considered by law to be separate property, and can remain so throughout the marriage. That means the asset can't be distributed in divorce and its value can't be weighed with regard to other distributions.

However, there is a possible exception to this, and that is if at any point that inheritance was converted in some way to a marital asset. For example, if you inherit a lump sum from a deceased grandparent and then place that amount into a joint account, it could be considered a marital asset because it's co-mingled with marital money.

If you have received an inheritance and want to make sure those funds/assets stay with you - regardless of the outcome of the marriage - take the following into consideration:

Negotiate a prenuptial or postnuptial agreement. These are not always 100 percent airtight. However, it could help to shield certain assets - including your inheritance - in the event of a divorce. Such an agreement can spell out how each spouse will forgo his or her rights to any inheritance or major gift given to the other during marriage.

Many people see these agreements as extremely unromantic. On the other hand, people are generally more realistic today than years ago about the prospect of a successful marriage. It's better to parse through some of these issues so that, if you do separate, they do not become bitter points of contention.

The other way benefactors can protect their newly-acquired assets is to save documentation. Whatever record there is that can indicate the gift/item/money was intended for one spouse only. Sometimes a gift-tax return can be helpful for this purpose, as it usually indicates the specific beneficiary for whom the asset was intended and exactly how much it was worth.

We would also note it's generally a good idea to maintain separate accounts. This can help spouses avoid arguments later, except in cases where the gift/inheritance was in fact granted to both parties.

Finally, it's often recommended that spouses rely on trusts for large assets or gifts. This would prevent the gifted item from becoming marital property.

Anyone with questions about how to protect assets in the midst of a split should contact an experienced divorce attorney.

If you are contemplating a divorce in New York City, call our offices at (718) 864-2011.

Additional Resources:

How to Keep Your Inheritance in a Divorce, Nov. 9, 2014, By Neil Parmar, Wall Street Journal

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