If you are filing for divorce, it’s important that you understand how inheritance is treated and whether it’s considered marital or separate property. Protecting your financial interests is imperative during this process, so continue reading for more information. Work with a skilled Bergen County property division lawyer for knowledgeable legal advice.
What is Marital Property?
Marital property, or marital assets, refers to any assets acquired by either spouse during the marriage. Marital property is subject to equitable distribution between the spouses during the divorce process. The source of the funds or whose name is on the title is generally not as important as the marital status at the time it was acquired.
On the other hand, separate property involves assets owned by one spouse before the marriage, or acquired individually during the marriage through a gift or inheritance from a third party. Separate property is not subject to division in the divorce. To maintain its separate status, the asset should be kept distinct and not commingled with marital assets. If separate property is used to benefit the marriage or is mixed with marital funds, it risks being partially or entirely reclassified as marital property.
Is My Inheritance Considered Marital Property in an NJ Divorce?
In New Jersey, an inheritance received by one spouse during the marriage is generally considered separate property. This means that, initially, it is not subject to equitable distribution during a divorce.
According to state law, an inheritance is treated similarly to a gift received individually from a third party, classifying it as an asset belonging solely to the spouse who received it. Therefore, if the inheritance remains clearly separate and distinct, it will be awarded entirely to the inheriting spouse during a divorce. However, it is possible for an inheritance to lose its separate property status and become partially or entirely reclassified as marital property through a process known as commingling.
What is Commingling?
Commingling occurs when separate property mixes with marital property or is used for the benefit of the marriage in a way that makes it difficult to trace its original separate status. Once an inheritance is commingled, it risks losing its protection as separate property and can become subject to equitable distribution during a New Jersey divorce.
Examples of how commingling occurs include the following.
- Depositing inherited funds into a joint bank account that is used for marital expenses
- Using inherited money to pay the mortgage on the marital home
- Investing inheritance proceeds into a joint investment account that both spouses manage and contribute to
- Using inherited funds to pay for renovations or improvements on a jointly-owned property
To protect your inheritance, it is crucial to keep it strictly separated in an account only in your name and avoid using it for any marital benefit. Consulting with a property division lawyer is the best way to protect these assets during a divorce.
