If you are filing for divorce in New Jersey, understanding how inheritance is treated is crucial to protect your legal rights and options. Continue reading for more information and consult with a knowledgeable Sparta property distribution attorney today.
Is NJ an Equitable Distribution State?
Yes, New Jersey is an equitable distribution state, meaning that marital property is divided fairly, though not necessarily equally, between the divorcing spouses. This is different from a community property state, where assets are generally divided in a 50/50 split.
In an equitable distribution system, the court will consider a variety of factors to determine what is fair, including the length of the marriage, the age and health of the parties, their financial circumstances, and each party’s contributions to the marriage, both monetary and non-monetary.
It’s important to note that only marital property is subject to equitable division. Marital property includes assets and debts acquired by either or both parties during the marriage, up to the date a divorce complaint is filed. Separate property is generally exempt from distribution.
How is Inheritance Treated in an NJ Divorce?
Generally, an inheritance received by one spouse in New Jersey is considered separate property and is therefore exempt from equitable distribution in a divorce. This means the inheriting spouse will typically retain the full value of the inheritance. The idea is that the asset was not acquired through the joint efforts of the marriage, so only one spouse is entitled to it.
To maintain its status as separate property, the inheriting spouse must demonstrate that the inheritance was kept separate from marital finances. For example, if the funds were deposited into a personal account and never mixed with marital assets, it strengthens the claim that it should be excluded from division. However, inheritance can lose its separate property status and be subject to equitable distribution if it is commingled with marital funds or used to purchase jointly titled assets.
What is Commingling?
Commingling occurs when separate property, such as an inheritance, is mixed together with marital property to such an extent that it loses its distinct separate identity. In the context of a divorce, when an inheritance is commingled, the court may determine that the funds have been converted into marital property, making them subject to equitable distribution.
The act of commingling doesn’t necessarily have to be intentional. It can happen through common financial practices and without you even realizing it. The important issue is whether the original separate asset can still be clearly traced and identified. Once separate funds are mixed with marital funds or jointly titled assets, proving their separate status becomes legally challenging.
Examples of commingling may include:
- Depositing inheritance money into a joint checking or savings account used for household expenses
- Using inherited funds as a down payment for a marital home
- Transferring inheritance funds into a joint brokerage or investment account
- Using inherited money to pay off the mortgage on a marital residence
- Depositing a large inheritance check into an account that already contains marital earnings
For more information, reach out to an experienced attorney today.