In any comprehensive estate plan, a letter of instruction (LOI) is an important component. An…
What should I do with my inheritance?
When it comes time to receive an inheritance, most people usually have a good idea what they want to do with it. There are bills to pay, savings for retirement, and the kitchen or bathroom that needs to be remodeled.
Although I’m sure most people do not have any trouble thinking of what to do with an inheritance, one thing that should be noted is how to own the inheritance.
If you are married in New York and you receive an inheritance, you should know that your inheritance is considered separate property under the Domestic Relations Law. This means that if you get a divorce then the assets you receive from an inheritance are not considered marital assets and are not taken in to consideration when determining equitable distribution of assets.
However, if you comingle your inherited assets or re-title them to include your spouse as a joint owner then that asset is now considered a marital asset and will be subject to the equitable distribution in the divorce proceeding.
Let’s take George for example. George has been having some bad luck lately. Unfortunately, George and his wife Pattie have been having some marital problems. George suspects that his best friend Eric is in love with his wife and he is concerned that the feeling may be mutual. To top it all off, George’s favorite uncle recently passed away.
George’s uncle left him some assets in his will, which includes a sitar, 100 acres of the family farm, and $100,000 cash. Despite his marital concerns, George deposits the $100,000 into a bank account he owns jointly with Pattie, and transfers the deed to the family farm to himself and Pattie as tenants by the entirety.
A few months go by and Pattie and George file for divorce. In the midst of their divorce, George learns that with the exception of the sitar, Pattie will now get half of the inheritance he received from his favorite uncle. If George did not comingle the $100,000 by depositing it into a joint account and transfer the deed to he and Pattie by tenants by the entirety, then he could have kept all of his inheritance, and not just the sitar.
If you received an inheritance, it is important to stop and consider how best to protect these assets to ensure that they do not become someone else’s property. In order to ensure the remainder of your inheritance is protected you should contact an experienced estate-planning attorney to understand your rights and create your estate plan.
By Eric J. Einhart – Guest Blogger
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