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Community Corner

New Jersey Divorce Law and Your Inheritance

A common question which is raised by parties in New Jersey divorce proceedings relates to a spouse’s receipt of an inheritance during the parties’ marriage.  While the general rule is that under New Jersey law, an inheritance or gift received by a party is exempt (i.e. remains the property of the recipient) from equitable distribution, there are some important considerations.  If an inheritance is received during the parties’ marriage and is maintained in a segregated account in the sole name of the party receiving the inheritance, then the inherited funds will not be divided at the time of the divorce.  However, if the inherited funds are placed in an account titled in both parties’ names or if the inheritance is used to purchase or improve a joint asset (e.g. the marital home), then the claim for an exemption will be defeated and the asset will be eligible for equitable distribution upon divorce.

 

Further, if funds from an inheritance are comingled with marital funds (even if the marital funds are maintained in one party’s name), then there could be a loss of the exemption.  At the very least, if inherited funds are comingled with marital funds, there could be an obligation to trace the inherited funds and to account for the use of the marital funds.

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Accordingly, the obvious lesson from New Jersey’s law of equitable distribution is that a spouse receiving an inheritance should open a new account and maintain the inherited funds in his/her own name.

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Although an inheritance can be preserved by the recipient as an asset exempt from equitable distribution, a Court could consider an inheritance in determining support issues.  For instance, if a “supported spouse” receives an inheritance after a divorce, the “supporting spouse” could seek a termination or reduction of alimony based on the inheritance.  Also, if one party receives a substantial inheritance and obtains those funds prior to the time that the parties’ children are applying for college, a Court could require the party receiving the inheritance to pay a greater portion of the children’s college expenses than that party may have otherwise been obligated to pay.  Further, a party’s receipt of an inheritance prior to a divorce, could be the source of funds for attorney fees for both parties during the divorce proceedings.

 

It is clear that there are issues related to the receipt of an inheritance which may affect the parties’ rights in divorce/family law litigation in New Jersey.  Consultation with an experienced matrimonial attorney is advised whenever an inheritance has been, or is going to be received by either spouse, prior to, during or even after a divorce in New Jersey.

 

Barry Chatzinoff, Esquire has been representing South Jersey residents in Matrimonial and Family Law matters for more than 30 years.

www.ChatzinoffLaw.com

Law Office of Barry Chatzinoff, P.C.

120 Haddontowne Road, Cherry Hill, NJ 08034

(856) 685-1095


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