How to protect your assets if your heir divorces

You may hate to think that your heir(s) will ever end their marriage, but the reality is that between 40 and 50% of all first marriages do end in divorce, with the rate of second-marriage divorces also rising even higher. Though you may not be able to predict the marital future of your heirs, you can plan ahead so that your estate is protected.

New York is an equitable distribution state

As opposed to community property, where assets are divided evenly between the divorcing parties, New York is an equitable distribution state, where the marital assets are divided by a judge. A judge considers many factors, such as what each spouse has contributed and what each will need in the future, as well as the length of the marriage, the overall health of each spouse, child custody, the loss of benefits such as health insurance and various other factors. 

Under New York law, marital property that can be divided during divorces includes income earned during the marriage, property purchased, retirement benefits and the appreciation of assets such as real estate. Separate property, or property that only one spouse owns in a divorce, would include property acquired before marriage, an inheritance received by one of the spouses or property specified in a pre-nuptial agreement. 

When inheritance is no longer a separate property

In order to keep an inheritance as separate property, your heir must be sure to keep it separate from marital property. For example, combining money from an inheritance into a shared bank account changes it from separate to marital property. Using inherited assets to pay off marital bills such as mortgages where the mortgage is shared, allows the inheritance to be treated as marital property.

Ways to protect inheritance when an heir divorces

There are a few things that can be done to protect an inheritance in case your heir divorces:

  • Ask your heir to have a pre- or post-nuptial agreement stating that the inheritance is separate property.
  • Advise your heir to keep their inheritance separate by not using it to open joint bank accounts or maintain any marital property.
  • Set up a family trust that will protect both your family and your assets.  
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