Inheritance in a New York Divorce

An inheritance received during the marriage is separate property, as long as it's kept separate. If it is deposited to a joint account or mixed with marital assets, then the situation becomes a bit more complicated.

The General Rule

Generally, an inheritance is the separate property of the spouse who received it. This is because an inheritance is specifically made an exception in Domestic Relations Law 236(B)(1)(d).

A Simple Example

Let's say you have been married for five years. During the marriage, you and your spouse have only managed to save $20,000. However, two years ago, a relative passed away and you received an inheritance of $200,000. You deposited the money in a new investment account that you set up in your individual name. The money has been in that account, earning some returns in stocks & bonds.

In the divorce case, the judge has no authority to give your spouse any of the $200,000. The judge only has the power to distribute the $20,000 that you have saved. Usually, it would be divided 50/50. Perhaps the judge would take note of the inheritance you received and give your spouse more than half, but honestly, that's doubtful. For all the judge knows, your spouse will inherit a million dollars in the year following the divorce.

What if the inheritance was deposited in a joint account, or mixed with marital money?

Many times, the facts are not as clear as in the simple example. Instead, the spouse receiving the inheritance may have deposited the money into the parties' joint investment/savings/checking account - perhaps permanently, perhaps for some period of time and then transferred it into some other asset, which may have in turn been jointly titled, but perhaps was individually titled in the inheriting spouse.

There have been many published case decisions on this point of law.

McGarrity v McGarrity (1995)

Facts: Husband received 250,000 inheritance after he and his wife had physically separated. He deposited it to a joint account, but later claimed that he did so for convenience only.

Result: Husband's separate property.

Key quote: "Significantly, the bulk of the inheritance money was not received. . . until after living separately, thus demonstrating the absence of any donative intent by the husband despite the wife’s continued access to the accounts."

Takeaway: The touchstone is intent:

Rosenkranse v. Rosenkranse (2002)

Facts: Husband's inheritance was received after 35 years of marriage, and was mixed with joint assets.

Key quote: "Defendant conceded. . . that he placed his wife's name on the accounts with the express purpose of making those funds available to her, for her convenience, not his."

Result: Marital property.

Takeaway: Making the funds available to one's spouse undermines the "convenience" exception.

Judson v Judson (1998)

Facts: Marriage of 12 years. The Court stated that the Husband commingled his separate property with marital money, and thus it became marital. (In fact, he transferred his separate money into joint accounts, which any decent matrimonial attorney knows is transmutation, not commingling.)

Result: Marital property.

Takeaway: Judges sometimes get confused about the difference between commingling and transmutation.

Spencer v Spencer (1993)

Key quote: "The fact that the plaintiff may have made withdrawals from his separate account to pay marital expenses does not alter this conclusion, as there was insufficient evidence of commingling to conclude that this account was transmuted into marital property.

Result: Separate property.

Takeaway: As long as you keep the inheritance separate from other marital assets, the fact that you paid some family expenses with the inheritance money does not make the inheritance a marital asset.

Feldman v. Feldman (1993)

Facts: The Husband received an inheritance but did not keep strict records. He did put some of the money in a joint account. Other money went to individual accounts.

Key quote 1: "In the case before us, the fact that a portion of the husband's inherited funds were deposited in a joint account does not support the further inference that the husband intended to treat all subsequently received funds, which were placed in his individual bank accounts, as marital property."

Key quote 2: "We further conclude that the record does not support the wife's claim that separate funds were commingled with marital funds to such an extent that they lost their separate identity. While the wife points to the husband's admission that he was a poor record keeper, and that he could not unequivocally state that the funds in certain of his smaller checking and savings accounts were derived solely from gift or inheritance, it is clear, as the Supreme Court found, that the vast majority of assets to which the husband had title at the time of the trial were in fact acquired through inter vivos gifts and bequests from his parents."

Result: Separate property.

Takeaway: Even if there is some commingling, that does not automatically change the property from separate to marital. Especially where the vast majority of the funds is separate.

Gundlach v. Gundlach (1996)

Facts: Marriage of 16 years. In the 11th year, the Husband was in an accident and received 200,000 as compensation (personal injury compensation is the same as inheritance under the law, so this fact doesn't change the analysis.) The Husband mixed these funds together with marital property. The Wife filed for divorce five years later.

Result: Marital property.

Takeaway: Five years is long enough that you probably can't "back out" the funds anymore.

Di Nardo v Di Nardo (1988)

Key quote: "The trial court erred in finding that a $34,217 check defendant received from his mother's estate was separate property. Defendant, upon receipt of this check, commingled it with other assets in a joint account where it remained for a period of seven years. By placing this check in a joint account, a presumption arises that the parties are entitled to equal shares of the account (Banking Law § 675 [b]). Defendant's proof failed to overcome this presumption and, therefore, this check plus accrued interest is marital property."

Result: Marital property.

Takeaway: Same as last case, but seven years.

Wiener v. Wiener (2008)

The Husband sold an apartment he owned before the marriage and deposited the proceeds into the parties joint account. Later, he admitted that the money was part of a "fungible bulk." He alleged, however, that he placed the money in a joint account because of his wife's "promises and threats." The wife did not specifically rebut that testimony; however, neither did the Husband buttress the testimony with any documentary proof, and the trial court may have simply disregarded his testimony.

Result: Marital property.

Takeaway: Where the evidence presented is not particularly convincing, the presumption of marital property is likely to carry the day.

Rheinsten v Rheinstein (1997)

Key quote:

"We conclude that the Merrill Lynch account is marital property only in part. Defendant adequately traced the source of $155,230.03 in the account to an inheritance from his father and a gift from his uncle. Although another $52,644.02 came from accounts jointly held by defendant and his uncle that were liquidated upon the uncle's death, those accounts existed during the parties' marriage, and defendant failed to rebut the presumption that they are marital assets. The remaining $8,180.71 used to fund the Merrill Lynch account came . . . during the course of his employment and is properly considered marital property. We reject plaintiff wife's contention that the entire Merrill Lynch account is a marital asset because defendant referred to the account as marital property and used the funds for marital purposes. Thus, we conclude that the Merrill Lynch account was funded 28.2% with marital assets and 71.8% with defendant's separate property.

Result: The inheritance was still Husband's separate property.

Takeaway: A single account can be classified as part separate, part marital.

Chiotti v Chiotti (2004)

Key quote: "The undisputed evidence is that the source of each of these accounts was either a gift from her father or an inheritance. Further, there is no evidence that these funds were either commingled with marital property or placed in the joint names of the parties."

Result: Separate property.

Takeaway: Nothing new here. The inheritance was not transumted or commingled, so it remained separate property.