A common question raised by clients is what will happen with my inheritance which was received during my marriage if I divorce my spouse? The answer depends on what steps you take after you receive your inheritance. When a court looks to make a distributive award of the assets of a marriage, the first thing it does is to define marital property. Marital Property, pursuant to Domestic Relations Law (DRL)§236, is defined as all property acquired during the marriage. Therefore, if you received your inheritance during the marriage, the presumption is that it is marital property. Again, any property acquired either before marriage or after commencement of an action for divorce or the signing of a separation agreement is not considered marital. Luckily there are exceptions to this general rule.
If property is received by bequest, devise or descent it is considered separate property. However, the steps you take after you receive your inheritance can alter this staus. If you placed your inheritance in a separate bank account solely in your name, then the Courts will probably consider this separate property. If, however, you placed your inheritance in a joint account, you may have comingled your inheritance which means that your inheritance may no longer be your sole 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? It probably is. For example, if you receive a three hundred thousand dollar inheritance and you use it as a down payment for the martial estate you will get a separate property credit of $300,000.00. ---if it was originally in your separate bank account. If you sell your house and there is a profit of $500,000.00, you can then request from the court to designate the first $300,000.00 as your separate property and then split the remaining $200,000.00. However, if you sell the home and there is only a $75,000.00 profit, that is all you will be entitled to receive and your spouse will not be responsible for paying back the down payment.
The best way to guarantee that you receive all of your inheritance is to put it in a separate account with just your name and do not touch it. While there may be issues that force you to use it for marital purposes, you must realize that now you will be blurring the lines of what is marital property and what is separate property. Inheritance issues are not black and white and can be tricky. Act with intention with your inheritance as it can be comingled and considered as marital property without you realizing it.