NJ Legal Protections for Inherited Real Estate in the Divorce Process

After much time and consideration, you decide to divorce. You know it is time to separate and divide everything you acquired over the years. Houses, cars, furnishings, financial holdings, accounts, and debts must all be split. But what about the home you inherited during your marriage? You might be confused about whether a real estate property that you inherited is subject to division in a New Jersey divorce.

Is Inherited Real Estate Subject to Division in a New Jersey Divorce?

New Jersey law requires courts to equitably distribute marital property between divorcing spouses if they cannot decide. Marital property includes all assets acquired and debts incurred by either or both spouses since the date of marriage. However, it does not include a spouse’s inheritances and gifts acquired during the marriage. An equitable distribution of marital property requires the spouses to distinguish the marital from the separate property so that only marital assets are divided fairly.

Inheritances and gifts acquired during marriage are separate property, which is not divided in a divorce. Property acquired before marriage is also separate property if kept separate. Spouses typically keep their separate property through a divorce. So, a spouse who inherits a house during marriage typically gets to keep it in a divorce. In New Jersey, inherited real estate is a separate property not normally configured into an equitable property division. As such, a spouse who inherits a childhood home from her parents most often can expect to keep it.

Exceptions that Transform Real Estate Inheritance into Marital Property

There are exceptions, however. An inherited house may become marital property subject to division at divorce when marital funds contribute to its maintenance. For example, a wife’s inheritance becomes partially marital property when the couple pays for a new roof for the inherited house or makes mortgage payments with marital funds. Using the married couple’s combined wages to maintain separate property creates a marital interest in the separate property asset. In other words, commingling separate and marital property is an exception to the separate property rule for inherited properties.

Another exception applies to real property appreciation due to the couple’s improvements or maintenance of the property during marriage. So, adding a new roof to the inherited childhood home may increase the property’s fair market value. That appreciation amount, the difference between the value before and after the roof, is attributed to marital efforts and is subject to division upon divorce. Another example of marital efforts appreciating the value of real property is when one spouse inherits land, but both spouses contribute funds and effort to building a house and installing plumbing on the raw land. The appreciation of the land with the residence belongs to the marital asset pool in divorce.

When the Source of Marital Funds Blurs the Lines of Inherited Property

Determining the source of funds for purchasing or maintaining real property is essential to establishing the proportion of separate and marital property interests in the realty. For example, a spouse who renovates her inherited property by borrowing against the property’s equity preserves her separate property interest in the property. However, when she pays the loan with her income while married, she commingles marital and separate property so that the marriage has an interest in the inherited property. The case may be different if she rented the property and used the rental income to pay off the loan. A judge may not find commingling.

Inherited Real Estate During Your Marriage? Take the Necessary Steps to Shield it from Division in a Divorce

When you have inherited property you intend to keep as your separate property, take the necessary steps to maintain its separate character. For one, do not combine marital and separate assets. Use separate property funds to improve or pay for the inherited house mortgage. Do not add your spouse to the title of inherited real property if you plan to keep it separate.

Additionally, keep your records clear so that they tell the story of the source of all payments, improvements, and your inheritance. So, you should keep all documents proving your inheritance, such as a copy of your parent’s will or trust, deed transfer documents, escrow documents, or other indicia of ownership. Keep a separate bank account for the property to trace the origin of funds coming in and out of the account and what it pays for.

Premarital or Postnuptial Agreements for Real Estate Protection and Asset Security

Another consideration is a premarital agreement provision specifying that inherited property remains separate property in a divorce or that such property becomes marital property, affecting the property classification for divorce purposes. For added security, draft a postnuptial agreement for your spouse to sign. Once properly drafted and executed, the postnuptial agreement stating the property is yours typically will stand up in court to protect your separate property asset.

Discuss How to Keep Your Inherited Real Estate During Divorce with Montanari Law Group

When you have doubts about how to protect your separate property or need help determining the classification of your inherited property, work with our experienced divorce attorneys at Montanari Law Group to get answers and tools to protect your interests. Divorce is a time to marshal assets and determine what you are facing when acquired assets are separated. Our insightful divorce lawyers can make sure you know what to expect after your divorce and potential problems that may arise beforehand. With extensive experience, we can trace the percentages of separate and marital property in your inherited real estate by reviewing documents that show the payment sources for upkeep or mortgage bills. We will also calculate the matrimonial interests in the property’s appreciation, if any, and review any postnuptial agreements. Ultimately, our investigation will give you a complete picture of what you can expect as separate and marital property, along with potential issues.

It is our passion to protect your interests during New Jersey divorce proceedings. As highly trained divorce negotiators and litigators, we are committed to protecting your legal rights and saving you time and money. Whether it be proving your proportional entitlement to assets, fair apportionment of debts, and right to alimony, we can assist you if applicable. Regardless of the scenario, our team handles all aspects of divorce, including child custody and child support, when relevant. We tailor the approach and the strategic resolutions to issues based on you, your life, your finances, your family, and the trust we build with you by communicating along the way.

Contact our office at (973) 233-4396  to talk to a divorce attorney to help you protect your inherited real estate and other separate property interests and resolve all issues of your divorce. We provide free, confidential consultations to clients in communities such as Hoboken, Summit, Livingston, Woodland Park, Montvale, Wyckoff, Franklin Lakes, and across Northern New Jersey.