Inheritance and Gifts in New Jersey Divorce: Are They Subject to Division?

Divorce often brings up numerous questions about the division of assets, particularly when it comes to inheritance and gifts. In New Jersey, the process for determining whether these types of property are subject to division is not always straightforward. Understanding how inheritance and gifts are classified during a divorce can be crucial for both parties as they navigate the equitable distribution process. Read on for a breakdown of how inheritance and gifts are treated under New Jersey law and the circumstances in which they may be considered separate or marital property. For personalized advice tailored to your specific situation, contact the Law Offices of John B. D’Alessandro to share your concerns with an experienced and knowledgeable Union equitable distribution lawyer.

Separate vs. Marital Property in New Jersey

In New Jersey, property is divided through a process known as equitable distribution during a divorce. This means that assets are divided in a way that is fair, though not necessarily equal. A key aspect of this process is determining what constitutes marital property, which is subject to division, and separate property, which is not.

Generally, inheritances and gifts received by one spouse during the marriage are considered separate property and are not subject to division in a divorce. However, as with most rules, there are exceptions. How the inheritance or gift was handled during the marriage can impact its classification.

Inheritance as Separate Property

Under New Jersey law, inheritance received by one spouse during the marriage is usually considered separate property as long as it remains solely in that spouse’s name. This means if the spouse who received the inheritance keeps it in a separate bank account or investment account and does not co-mingle it with marital assets, it will likely be excluded from the equitable distribution process.

However, if the inherited funds are deposited into a joint account or used to purchase jointly titled property (such as a home), the inheritance may lose its separate property status. In such cases, the inheritance could be classified as marital property and become subject to division.

Gifts Between Spouses

Gifts exchanged between spouses can also be a source of confusion in divorce proceedings. Gifts given to one spouse by a third party are generally treated as separate property, similar to inheritances. However, like inheritances, if the recipient spouse co-mingles the gift with marital assets, the gift may be reclassified as marital property.

On the other hand, gifts exchanged between spouses are generally considered marital property, even if the gift was intended solely for one spouse. For example, if one spouse purchases a car for the other during the marriage, that car is likely to be considered marital property, regardless of the intent behind the gift.

Co-mingling of Assets and Its Impact

One of the most important factors in determining whether an inheritance or gift remains separate property is whether the asset has been co-mingled with marital property. Co-mingling occurs when the separate asset is mixed with marital assets in such a way that it is no longer distinguishable as separate property.

For example, if a spouse receives an inheritance and deposits it into a joint account that both spouses use for household expenses, the inheritance could be deemed marital property. Similarly, if inherited funds are used to renovate a marital home or invest in a business owned by both spouses, those funds may lose their separate status.

In some cases, even if the funds are kept in a separate account, the growth or income from those funds (such as interest, dividends or investment income) could be considered marital property if the growth was due to efforts or contributions made during the marriage.

Protecting Inheritance and Gifts in Divorce

If you want to ensure that an inheritance or gift remains separate property during a divorce, there are steps you can take to protect it. Keeping the inheritance or gift in a separate account and avoiding any mixing of those funds with marital assets is crucial. Additionally, it may be wise to create a prenuptial or postnuptial (premarital or marital) agreement that clearly outlines how any inheritance or gifts will be treated in the event of a divorce.

In situations where there has been co-mingling, it may still be possible to trace the funds back to their source. This process, known as tracing, involves demonstrating that the funds originated from a separate source, such as an inheritance or gift, even if they were deposited into a joint account or used for marital purposes. However, tracing can be complex and may require the assistance of a forensic accountant or other financial experts.

When Inheritance and Gifts Become Marital Property

There are several scenarios in which an inheritance or gift might be considered marital property and subject to division, including:

• Co-mingling: As mentioned, if the inheritance or gift is deposited into a joint account or used for joint expenses, it could lose its separate status.
• Contributing to Marital Assets: If inherited funds are used to improve or maintain marital property, such as a home or shared business, those funds may be considered marital property.
• Active Participation: If one spouse actively contributes to the growth or appreciation of an asset that originated as an inheritance or gift, the appreciation may be deemed marital property. For example, if a spouse manages an investment portfolio that includes inherited funds, any growth due to their efforts might be subject to division.

Contact Union Family Law Attorney John D’Alessandro for Help With Equitable Distribution in Union, Essex, or Middlesex County

If you are concerned about how an inheritance or gift will be treated during your New Jersey divorce, it’s important to seek legal advice. An experienced family law attorney at the Law Offices of John B. D’Alessandro can help you understand your rights and guide you through the equitable distribution process to protect your assets.

Whether you’re planning for a divorce or are in the middle of one, safeguarding your inheritance or gifts requires careful planning and legal expertise. Contact our office today at 908-964-0102 to schedule a consultation and learn how we can help.