Typically, under New York law,  income and/or property acquired while married is considered a marital asset. But, what about property acquired through an inheritance, for instance? Money from an inheritance can be converted to marital property, but you’re going to have to provide a very convincing argument.

History of the Case

It is reported that the husband and wife married in 2013. During the marriage, the wife received a $125,000 inheritance from her grandfather, which she used towards the $160,000 purchase of their marital residence the following year. The remaining $35,000 was covered by a mortgage. Notably, the wife provided the husband a “gift letter” stating that the $125,000 was an outright gift to him so that he could demonstrate he had sufficient funds to purchase the home.

Allegedly, the husband commenced a divorce action in 2021. The trial court issued a judgment of divorce that included the distribution of marital property and awarded maintenance to the wife. The husband appealed the judgment, particularly challenging the trial court’s decisions on the classification of the $125,000 inheritance as separate property, imposing responsibility on him for the mortgage, and the awarding of maintenance to the wife.

Property Characterization in New York Divorce Actions

On appeal, the court largely upheld the trial court’s ruling but modified the judgment by vacating the part that addressed the parties’ obligations related to the mortgage on the marital residence and remitted the matter to the trial court for further proceedings.

In doing so, the court noted that the husband had not preserved his contention that the $125,000 inheritance should not be treated as separate property since he had conceded this point at trial. Therefore, the court upheld the determination that the wife was entitled to a separate credit for her inheritance.

Regarding the mortgage, the court rejected the husband’s argument that his responsibility for the mortgage was akin to an award of maintenance. It clarified that maintenance involves periodic payments for a spouse’s support, whereas the mortgage payment was intended as a division of marital debt.

However, the court found that the trial court erred by not directing the wife to remove the husband’s name from the mortgage upon the payment of his share. This omission meant the husband could remain liable to the bank despite transferring his interest in the property. Thus, the court remitted the matter so that the trial court could calculate each party’s share of the mortgage balance and amend the judgment to relieve the husband of further mortgage obligations once he made the required payment.

Confer with a Skilled New York Divorce Attorney

While most assets acquired during the course of a marriage are considered marital property, there are, however, exceptions such as money acquired by inheritance. If divorce is something you are considering or if you have initiated a divorce without a New York Divorce Attorney, I strongly urge you to contact an experienced lawyer as soon as possible.  Your entire financial future is at risk … the financial impact of divorce isn’t just about a settlement today, it’s also about what can happen in the years to come.  Safeguard your financial health today . . . utilize the services of a New York Legal Team specializing in divorce.

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