Is An Inheritance Marital Property in NJ?

Divorce is incredibly common in our country. According to statistics, Americans divorce at a rate of 2.3 per 1,000 people. If you are considering divorce, you likely have several concerns: Will you get custody of or visitation with your kids? Will you have to pay alimony? What will your child support payments be like? How much of your assets will you have to split? Will you lose your house? Is an inheritance marital property in New Jersey subject to being divided?

These questions are common. The answers will depend on the facts of your case. When it comes to the property you have inherited, which is the concern we are addressing here, New Jersey law provides that this is excluded from the division of assets — with some notable exceptions.

A Bergen County divorce lawyer can advise you about how your inherited property may — or may not — be included in your divorce case. Read on to understand in general terms how property is divided in New Jersey, how marital and separate property are determined, when an inherited asset may be classified as marital property, and how to protect your inherited assets in a divorce.

How Property Is Divided in a New Jersey Divorce

In a New Jersey divorce, the property is divided using a concept known as equitable distribution. This does not mean that all property is split equally. Instead, it is split equitably — or fairly.

In some cases, equitable distribution may mean that assets are divided 50/50. In other cases, equitable distribution may result in your getting more or less than 50%. The ultimate decision will be based on the specific facts of your case.

Understanding Marital Property and Separate Property

There is a three-step process for dividing up assets in New Jersey. First, a court will determine what assets are subject to distribution, which involves determining which property is marital and which is separate.

Marital property may include anything acquired during the course of the marriage, such as the marital home, vehicles, stock options, bonuses, bank accounts, and even lottery winnings.

Contrary to marital property, property acquired before marriage is labeled separate property. Separate property is generally not subject to equitable distribution in a divorce. This may include property acquired before the marriage, gifts from third parties to one spouse, and inheritance to just one spouse. But, this is not where the analysis ends so keep reading!

There are several rules about what constitutes separate property and how it must be maintained. For example, if one spouse owned a vacation home before marriage, and both spouses improved it during the course of the marriage, it may not stay separate, but rather may turn into marital property with a portion of it subject to division (or the value of the property being subject to division).

Second, the parties have to assign values to the marital property so that it can be divided equitably. In some cases, this process is relatively straightforward, like looking at bank statements to determine the total value. In other cases, financial experts may need to value a business or analyze stock options in order for the court to make a decision. Sometimes an appraiser needs to be hired to value a piece of tangible property, like a house or jewelry.

Factors in Dividing Marital Property

Under N.J.S.A 2A:34-23.1, New Jersey courts consider these factors to decide how marital property is to be divided:

1. Age and physical and emotional health of each spouse
2. Duration of the marriage
3. Income or property brought to the marriage by each spouse
4. Standard of living established during the marriage
5. Any written agreement made before or during the marriage concerning an arrangement of property distribution (prenuptial or postnuptial agreement)
6. Economic circumstances of each spouse at the time of the division of property
7. Income and earning capacity of each party
8. Contribution by each party to the education, training or earning power of the other
9. Contribution of each spouse to the marital property, as well as the contribution of a spouse as a homemaker
10. Tax consequences of the proposed distribution
11. The present value of the property
12. Need of a parent who has physical custody of a child to own or occupy the marital residence and to use or own the household effects
13. Debts and liabilities of each spouse
14. Any need for creation, now or in the future, of a trust fund for medical or educational costs for a spouse or children
15. The extent to which a spouse deferred achieving their career goals, thereby enhancing the other party’s earning capacity
16. Any other factors that may be relevant.

The last point is critical, as it is a “catch-all” provision that enables the court to act in equity and fairness. For example, if you have a child with significant special needs, a court may consider that when dividing property.

Can An Inheritance Be Taken in a Divorce in NJ?

Now that you understand how equitable distribution works in New Jersey, let’s get back to the question of whether an inheritance to one spouse in a marriage is considered marital property and can potentially be taken in a divorce in NJ.

Under New Jersey law, property that was acquired during marriage through inheritance or intestate succession is generally not subject to equitable distribution. Intestate succession is the way that property is passed down if someone dies without a will.
For example, if one of your parents died without a will, then their property would be divided among their heirs in accordance with New Jersey law (i.e., to a spouse, children, etc.).

No matter how you received an inheritance — whether through being included in a will or through intestate succession — it will first glance be considered separate property. As separate property, it will not be subject to equitable distribution in a divorce.

As we said earlier, there are exceptions to this general rule. Here are some examples:

• If an inheritance is in the name of both you and your spouse, then it may be considered marital property.
• If you do certain things with the inheritance, like using the money to buy a home for your family that is put into both of your names or a car that has both your names on the title, then you may have converted it into marital property, even if you did it unintentionally.
• If you inherited your parents’ home, decide to live there, and add your spouse to the title, the house may now be marital property.
• If you inherit a house and your spouse contributes to improving it and improvements increase the value, the increased value may be subject to equitable distribution.
• If an inheritance was received by one party and put into a joint bank account with the other spouse, the assets have been commingled and the inheritance could be considered marital property and subject to being equitably distributed.

There are other scenarios as well. If you are concerned that an inheritance you received individually may be classified as marital property, speak to a New Jersey divorce attorney who can examine your specific situation and provide experienced counsel. Who gets what in divorce can become a heated and complex area of disagreement that a knowledgeable lawyer can help you navigate.

How Can Inherited Assets Be Protected in a New Jersey Divorce?

In seeking to protect inherited assets in a New Jersey divorce, you will need to prove to the court that the property is yours alone and you do not fall into one of the above exceptions or there is a legitimate reason for doing so that has nothing to do with entitlement (like estate planning). Toward that end, keep records of how you received the inheritance and careful documentation that traces your ownership of the property and that you kept it separate throughout the marriage.

If there is any evidence of commingling of the inheritance assets, it may be difficult, depending upon the reason for commingling and how long the assets were commingled, to argue that they are not marital assets.

If you have received an inheritance — either before your marriage or during it — then it is a good idea to consult with a Bergen County divorce lawyer to understand the intricacies of this area of the law so that you can protect the inheritance from being categorized as marital property and subject to possible division. If your soon-to-be ex-spouse is disputing that an inheritance is your separate property, a skilled attorney will work to help you keep what is rightfully yours.

Before or during marriage, consider protecting an inheritance by drawing up a prenuptial or postnuptial agreement. These agreements must be agreed to and signed by both parties and may help protect your inheritance should your spouse later dispute your claim that an inherited asset is yours alone.

Contact Our Bergen County Divorce Lawyer for Help

Divorce can be a costly, highly emotional process. When you are facing the possibility of giving away the property that you have spent a lifetime accumulating, it can be particularly difficult. Taking action and obtaining knowledge to protect your assets — including any inheritances that you have received is a prudent thing to do.

At Men’s & Fathers’ Rights Divorce Lawyers by Schultz & Associates, LLC, we understand how challenging this process can be for our clients. We will aggressively advocate for your interests in a divorce case, especially when it comes to characterizing property and the division of assets. To learn more or to schedule an initial confidential consultation, call our firm at (201) 880-9770 or reach out online.

Carrie S. Schultz, Esq. – author

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