When some marriages in New Jersey end, the negotiations might include alimony payments. For some spouses, there is a question of how payment amounts might be affected if they inherit a significant sum. While in some cases an inheritance might impact the amount of alimony payments, it all depends on when the inheritance was received, how the funds were used and how the inheritance was set up.
An inheritance is a separate asset if it is not commingled
An inheritance is generally considered a separate asset when divorcing couples are negotiating their settlement. However, if the inheritance money is used to acquire a marital asset or to support the other spouse, then the funds become commingled and will be considered when determining alimony payments. Some of the ways inheritance might become commingled include:
- Buying a home with the inheritance but putting the title in both names
- Using the inheritance money to improve a home owned by the couple
- Making investments with the inheritance money in both spouses’ names
How to protect inheritance during the divorce
One way an inheritance can be protected if a divorce is imminent is by having the inheritance set up as a trust for “health, maintenance and support” The trust provides protection for the person inheriting the money so that if a creditor sues the receiver, the inherited money will not be affected. With a trust, the spouse receiving the inheritance can also tell the trustee that they need few or no distributions for the time being to prevent accidentally commingling the money as the divorce process approaches. This will also prevent spousal support amounts from being affected.
Commingling funds is often unconsciously done by couples. If your marriage is struggling and you are not sure it will survive, it is best to hold off on using your inheritance during that time to protect your interests.