If I Were a Rich Man…

“My father left me a lot of money when he died during the marriage. My spouse can’t touch that, right?” As usual, it depends.

In New Jersey, generally an inheritance (money, real property, etc.) is not subject to equitable distribution. So, upon a divorce, generally the spouse who has the inheritance will not have to give his/her spouse a piece of it, and that’s true whether the spouse received the inheritance prior to or during the marriage.  But, in order for an inheritance to truly be protected, it must be kept separate/segregated and not commingled.

For example, let’s say you received a large cash inheritance. The inheritance was initially transferred into an account in your sole name. But, you do all of your banking from the joint account you share with your spouse, so you move that money into the joint account. You and your spouse are then in the midst of a divorce. Your spouse wants to split the funds in the joint bank account, but you object, because most of the money in the account is from your inheritance. In fact, you didn’t intend to give your spouse that money; you just thought it would be easier to keep all of your money in one bank account. This is a classic example of having “commingled” the funds, and it could cost the spouse who received the inheritance a big chunk of it. A court, if presented with this scenario, may consider the inheritance a gift from the spouse who had the inheritance, and gifts between spouses are subject to equitable distribution.

Here’s another common example—real property. You inherited a house in your sole name and you wisely never put the house into joint names with your spouse. But, you did pay the real estate taxes, mortgage, and homeowners insurance with funds from your joint bank account. Time passes and eventually you and your spouse are in the midst of the divorce. She wants her equitable share of the house. You don’t think she has a right to it—after all, the house is in your sole name. Unfortunately for you, your spouse could make a claim that the home in your sole name was commingled and became a marital asset subject to equitable distribution because you paid some of its expenses with marital funds. In this scenario, your spouse could end up with an equitable share of the home.

The issue of commingling an inheritance is extremely fact sensitive.  However, if you want to be confident your spouse will not get a piece of your inheritance if you divorce, remember this simple and ineloquent mantra: don’t litigate, segregate.

Date Published: April 4, 2017


Written by: Alexandra Rigden