In New Jersey, inheritances are protected by law — but only if you take the proper steps to keep an inheritance completely separate from joint marital assets.
If you inherit money or property prior to your marriage, you can maintain sole possession of your inheritance even after the marriage ends if you ensure that your inherited assets are never shared with your spouse. If any portion of the money you inherited is deposited into a joint bank account or if any of your marital funds are added to your inheritance account, those funds are considered to be co-mingled and thus subject to division in a divorce.
Inheriting money or property during a marriage does not entitle your spouse to any share of your inheritance in a divorce if your inheritance was kept totally separate from marital assets. You must not use any inherited funds to benefit marital assets — for example, using inherited money to pay your mortgage or make improvements to your home — or your inheritance will be considered co-mingled and subject to the laws of distribution in a divorce.
In addition, you must be careful to avoid transmutation, which is a more subtle form of co-mingling. An example of transmutation is if you use marital funds to pay a contractor to perform work on your inherited property. If transmutation can be proven, your ex stands a good chance of making a claim on your inherited property during a divorce.
The best way to protect inherited property from becoming a joint marital asset is to only use your own non-marital funds to maintain it. You should not have your spouse make any improvements to the inherited property, as that could be considered a “sweat equity” investment in your inheritance and your soon-to-be ex could be compensated for that in a divorce.
Another way to head any courtroom battles over inherited assets is to include them in a prenuptial agreement. A prenup can protect assets that one spouse already owns or will inherit. It can also be used to establish a framework for what happens to those assets in the event of a divorce.
If you have a significant inheritance that you want to ensure stays in your family, you may want to consider putting the inherited assets into a trust. You would then name beneficiaries to receive those assets so if you divorce, the inheritance is safe in the trust and not part of your marital property.
Protecting your interests and achieving results that support your needs is what you can expect from Murphy & Cistaro. Contact us today for your free consultation.