Protecting inherited property from division in divorce

In divorce, it isn’t always easy to determine beforehand how property will be divided up. One of the reasons for this is that states have different rules regarding division. In addition, general rules pertaining to property division often have exceptions that can apply depending on the circumstances. Take property received by inheritance, for example.

In many states, including New York, inherited property is generally considered separate property. Nonetheless, there is that possibility that part or all of it could later be deemed marital property in court – and therefore subject to division. Because of this possibility, it is important for couples to understand their state’s law going into marriage and take the necessary steps to ensure inherited property remains separate in the event of divorce. There are a few ways of doing that:

Separate accounts

One is to ensure that separate accounts are maintained to keep inherited funds separate from the non-inheriting spouse’s funds. This can be done with a separate bank or investment account, or by placing inherited assets in a trust specifically designed for this purpose.

Individual title

Another strategy is to keep the title of inherited property only in the name of the spouse who received it and, if necessary because of state law, to restrict use of the property so that it cannot later be classified as community property. Inheritances which are received during marriage can sometimes also be safeguarded from division by retaining paperwork showing the inheritance was only intended for one spouse.

Prenuptial/postnuptial agreement

One of the best ways to deal with the possibility of losing inherited property to divorce is to negotiate a prenuptial agreement (for couples that are not yet married) or a postnuptial agreement (for married couples). Couples can do this by including a provision in which one or both parties waive their right to any inheritance of rights given to the other party prior to or during marriage. When putting together such an agreement, it is important to work with an experienced attorney to ensure that the agreement is property executed.

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