Inheritance Rights in a Divorce on Long Island

A common question raised by clients of long term marriages—generally longer than ten years—is what happens with my inheritance which I received during the marriage?  The answer is: it depends what you did with said inheritance.  When the Court looks to make a distributive award of the assets of the marriage, the first thing it does is it defines marital property.  Marital Property, pursuant to DRL§236, is defined as all property acquired by either or both spouses during the marriage and before the commencement of an action for divorce or the signing of a separation agreement.  So, the initial question becomes, when did you receive this inheritance?  If you received your inheritance during the marriage, the presumption is that it is marital property.  Thankfully, there are four exceptions to this general rule.

Relevant to this issue, if property is received by bequest, devise or descent it is considered separate property.   So it seems as if your inheritance is protected as separate property.  Yet, nothing is that simple.  Once you received your inheritance, the question now becomes what did you do with it?  Did you open up a separate bank account and deposit said inheritance in that account which is strictly in your name?  If you did, then the Courts will probably consider this separate property.   If you’re like most people, you placed your inheritance in a joint account, and there lies the problem.

Once you placed your inheritance into a separate account, you have comingled funds, and thus the money is now marital property.  (The subject of another blog is the comingling for convenience—all is not lost if you comingle—however the presumption will be that the comingled account is now marital property).   A far more complicated and common issue is what happens when you take your inheritance and purchase a house?  Is that house now marital property?  Probably.  Lets say that you received a three hundred thousand dollar inheritance and you placed it all as a down payment for the martial estate.  Did you lose the inheritance?  In this scenario, you will get a separate property credit of $300,000.00.  If you sell your house and there is a profit of $600,000.00, you can then petition the court to designate the first $300,000.00 as separate property, the money being an inheritance and originally separate property.  The balance of the estate will then be split by the parties.  Of course, what if the house is sold and you break even?  What if you sell your house and there is only a $50,000.00 profit?  Arguably, that money should be designated as separate property.  Either way, your spouse will not be responsible for paying back the down payment.

Inheritance issues are not black and white and can be tricky.  If you are contemplating a divorce and you have concerns about your inheritance, contact us for a free consultation.

Enhanced by Zemanta

Speak Your Mind

*


3 × = twenty four