When Does an Inheritance Become Marital Property in New York?

Long Island divorce lawyers advise clients who want to hold on to their bequest

If someone bequeathed a substantial asset to you in their will, you might know that New York law allows you to classify the inheritance as separate property. This means that, if it retains separate property status, you would maintain full ownership even if you and your spouse decide to divorce. In many instances, however, inherited assets are transmuted into marital property, meaning that they can be divided between divorcing spouses. Bryan L. Salamone and Associates, P.C. is the Long Island divorce leader and we answer questions such as "When does inheritance become marital property?" for clients across Nassau and Suffolk counties.

How inheritance is treated in New York divorce

When a married couple divorces, each asset they own is classified as either marital or separate property. Separate property owned individually by one spouse prior to the wedding returns to that spouse in a divorce. Generally, all assets accumulated from the date the couple wed are considered marital property and are divided among the parties upon the legal dissolution of their marriage. However, there can be exceptions, such as when a valid prenuptial agreement calls for a different disposition. Another exception can occur when one spouse is left an inheritance, but this depends on various factors, so it is important to consult with a qualified attorney if you are seeking to keep assets you’ve inherited out of a marital property distribution.

When an inheritance remains separate property

An inheritance that is only bequeathed to you is generally classified as separate property, but it might not remain that way unless you are careful. Strict measures must be taken to ensure that inherited assets are not commingled with the marital estate. By working with a knowledgeable New York lawyer, you can do what is necessary to preserve separate property status for your inheritance.

When an inheritance becomes marital property

Some spouses who believed that they would be able to leave their marriage with everything they inherited learn too late that they have been transmuting separate property into marital property in one of the following ways:

• Joint account deposits — Bank accounts and other financial instruments that are jointly owned by spouses give either party the right to access all of the available funds, regardless of whether the assets originally came from separate property.
• Inheritances in the name of both spouses — After a family member gets married, a testator might add their loved one’s spouse to their bequest. In these cases, the inheritance becomes part of the marital estate to be distributed among both parties to a divorce.
• Property that is used or maintained by both spouses — Parents sometimes choose to leave the family home or business to their descendants. While this might originally constitute separate property, the recipient’s spouse could contribute to the asset’s value by contributing to mortgage payments, taking care of the property or working at the family-owned company. These contributions could put all or part of the inherited asset into the marital estate.

The difference between separate and marital property can be very subtle, so if you have any question at all about the treatment of something you’ve inherited, it’s best to speak with a lawyer before making any moves.

How timing of an inheritance affects classification as separate or marital property

When someone receives an inheritance prior to being wed, it is classified as separate property along with everything else a spouse owns in advance of the marriage. These assets could be shifted to the marital estate depending on the beneficiary’s actions. Bequests left to one individual spouse during the marriage should still be eligible for separate property status, but great care must be taken not to deposit funds in a jointly owned account or commingle assets in another way. Once the marriage is terminated, a former spouse has no claim to any inheritance left to their ex.

Using a portion of an inheritance to pay for marital property

Using what you’ve collected in an inheritance to purchase marital property prevents you from claiming those funds as separate property in a divorce. Therefore, if a loved one leaves you $100,000 in their will and you use half of that money to help purchase a home for your family, the home is part of the marital estate. You cannot argue that you are entitled to a greater share of the home’s value because you paid for part of it with an individual inheritance. Funds that stay in an individual account could remain separate property.
Protecting an inheritance in a New York divorce

If you have received, or expect to receive, a substantial inheritance, our firm offers several strategies aimed at protecting an inheritance in a divorce. One way to do this is to execute a prenuptial or postnuptial agreement declaring that any bequests remain as the separate property of the spouse who receives them. Make sure that you retain a copy of the will so that there is no question about whether you and your spouse were joint heirs. From there, you should establish an individual account to hold funds or ensure that title remains only in your name for assets such as real estate and vehicles. Passing on property through a testamentary trust also limits the ability of a divorcing spouse to reach assets, because they are owned by the trust until distribution to the beneficiary, so there is no possibility of commingling.

Contact a knowledgeable New York divorce attorney

Bryan L. Salamone & Associates, P.C. advises clients throughout Nassau and Suffolk counties on all types of issues relating to the division of marital property, including the treatment of inherited assets. To make an appointment to learn about your legal options, please call 1.631.479.3839 or contact us online.