Are Gifts or Inheritance Property to be Divided in Divorce?

  • Generally no. Gifts or Inheritance are the most significant property excluded from the net family calculation.
  • Excluded gifts or inheritance, aside from the matrimonial home, must be from a third party after the date of marriage. Additionally, the donor must expressly give to one spouse to the exclusion of the other.
  • Gifts and inheritance acquired before the date of marriage are included. The importance between property acquired before and after marriage is the fact that the pre-marriage value is deducted.
  • Gifts or inheritance used for the purchase or betterment of the matrimonial home are divided.

Divorce, Inheritance and Gifts: What to Divide?
In a Divorce, do I have to divide income from gifts and inheritances that the donor or testator expressly states is to be excluded?

  • Generally no. A donor or testator may explicitly state that the income from the gift or inherited property is excluded.
  • Income from the gift or inheritance, traced to the matrimonial home, is not excluded from the net family property calculation, despite being explicitly stated by the donor or testator. 

Do Insurance Proceeds and Courts Settlements have to be Divided?

  • Damages, or a right to damages for certain personal injuries are excluded.
  • For instance, if A gets into a car accident and the insurance company pays $25,000.00 for personal injuries and nervous shock, the $25,000.00 is excluded from the net family property calculation.  

Do proceeds of a Life Insurance have to be divided?

  • When a spouse holds a life insurance policy, the value of the proceeds is excluded from the net family property calculation. 

Do I have to divide property if I signed a prenup?

  • Generally no. Spouses may mutually decide to exclude certain property in a marriage contract or separation agreement.

Divorce inheritance and gifts: What is tracing and why is it important for exclusions?

  • Tracing is best defined through an example. A receives a car from her father and instead of selling the vehicle and using the proceeds to make a mortgage payment, A purchases a dining room table. That dining room table is now excluded because it can be traced to the original gift. 
  •  Tracing applies where the excluded property is converted into any other property, except a matrimonial home, which is identifiable on the valuation date. The kinds of property that fall under this category include: for example, gifts and inheritances, property that the donor or testator expressly states is to be excluded from the spouse’s net family calculation, insurance proceeds and proceeds from life insurance. 

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