As a general rule, the answer under New Jersey divorce law is no.
If you receive an inheritance during your marriage, that inheritance is generally considered separate property and is not subject to equitable distribution in your divorce.
But, like many things in divorce law, there can be exceptions.
New Jersey law generally excludes property that one spouse receives through an inheritance from the assets that will be divided between spouses in a divorce.
So, let's say that while you're married, a parent passes away and leaves you $500,000. If you receive that inheritance and keep it separate, your spouse generally does not automatically become entitled to half of it simply because you were married when you received it.
The important words there are keep it separate.
Problems can arise when inherited money gets mixed together with marital money.
Let's say you inherit $500,000 and deposit the entire inheritance into a joint bank account that you and your spouse have used throughout your marriage. The money stays there, gets mixed with your other funds, and both of you use the account.
Years later, you file for divorce.
Now you've created an issue that might not have existed if you had simply kept the inheritance in an account in your name alone.
Your spouse may argue that your actions showed an intention to make some or all of that inheritance marital property.
Whether that argument succeeds depends upon the particular facts of the case. Simply moving inherited money doesn't necessarily produce the same result in every divorce, which is why tracing the funds and determining what the spouses intended can become important.
Suppose you inherit $2 million and your spouse claims that you later gifted part of that inheritance to him or her.
You say you didn't.
Now the Court may have to look at the evidence and determine what actually happened. How was the money titled? Where was it deposited? How was it used? What did you and your spouse do with it during the marriage? Is there evidence showing that you intended to give your spouse an ownership interest?
Those details can matter.
The fact that money originally came from an inheritance doesn't mean you should stop paying attention to what happens to it afterward.
The simplest approach is usually to keep inherited assets separate.
If you receive an inheritance and want to preserve its separate character, keep good records showing where the inheritance came from and consider maintaining the funds in an account titled solely in your name. Be particularly careful before depositing inherited money into a joint account, using it to purchase jointly titled property, or otherwise mixing it with marital assets.
And if you've already commingled inherited funds, don't automatically assume you've lost your entire inheritance. Talk to an experienced New Jersey divorce lawyer. Depending upon the circumstances and the available records, some or all of the inherited property may still be traceable.
An inheritance can represent a significant amount of money, property, investments, or even an interest in a family business.
If you're fortunate enough to receive one during your marriage, don't wait until you're getting divorced to think about how you've handled it.
Keep records. Understand how the asset is titled. And before you move inherited money into a joint account or use it to purchase something with your spouse, understand what that decision could mean if your marriage eventually ends.
If you're considering divorce and want to better understand how New Jersey law treats your money, property, and other assets, my free Divorce Smarter Course explains important financial issues you should understand before and during a New Jersey divorce.
Until next time,
Steve