New York Divorce Law Concerning Inheritances
By Beverly Bird
Updated April 01, 2020
New York is an equitable distribution state. What this means if you're filing for divorce is that if you can't reach an agreement with your spouse regarding your property, the court will divide it in a way that seems fair – not necessarily 50-50. Fairness depends on a statutory list of 14 factors in New York, and the last factor gives a judge permission to consider anything else he thinks might be pertinent. This can make property division an uncertain process, but some hard-and-fast rules apply regarding inheritances.
Separate Vs. Marital Property
New York courts divide only marital property between spouses in a divorce. Marital property is typically anything you and your spouse acquire after the date of your wedding, regardless of which of you holds title. Some property is exempt, however, including personal injury awards and inheritances, even if you receive them while you're married. Unless you take some action to change the separate property nature of your inheritance, you don't have to share it with your spouse. Anything you purchase with your inheritance, or with income produced by your inheritance, is your separate property as well. Inheritances left to both you and your spouse are marital property, however.
Read More: How to Separate Property Appreciation in Marriage
Commingling or Transmuting Inherited Assets
Certain actions can change your separate property into marital property – which is divisible in a divorce – under New York law. Commingling is most commonly associated with cash inheritances. You might receive a lump sum of money and deposit it into a joint marital account, or place it in an account in your sole name then deposit marital monies along with the inherited funds. Transmutation occurs when you change title to an asset from your sole ownership into joint ownership with your spouse. For example, you might inherit real estate then place the deed in both names.
Unlike some states, New York case law holds that if your asset appreciates in value after you inherit it, the appreciation remains your separate property. However, this only applies if the appreciation is passive – your spouse had no part in creating the increase in value. For example, if you place a cash inheritance in an investment account and it generates interest or dividends, this is passive appreciation and it's yours. If you inherit a home and your spouse contributes to its maintenance or improvements, either through cash or physical labor, this is active appreciation. She's entitled to an equitable share of the difference between the home's value at the time of your marriage and its value at the time of your divorce.
Burden of Proof
If you've commingled or transmuted your inheritance, it doesn’t necessarily follow that your spouse will receive a percentage of its entire value, but New York places the burden of proof on you to show why this shouldn't happen. If you can identify which portion of an asset is representative of your separate inheritance, the court will remove it from the equitable distribution equation. For example, if you can identify marital deposits made to an inherited bank account, the balance after subtracting these deposits is your separate property. If you make a financial contribution from your inheritance to marital property and can prove to the court exactly what that contribution was, it remains your separate property under New York law. For example, if you inherit $100,000 and use $30,000 of the money to make a down payment on the marital home, $30,000 of the home's value returns to you.
Beverly Bird is a practicing paralegal who has been writing professionally on legal subjects for over 30 years. She specializes in family law and estate law and has mediated family custody issues.