Planning Inheritance

Can an Inheritance be Divided in Divorce?

In New York, inheritances are generally considered separate property, which means they're not subject to division in a divorce. However, there are important exceptions: 

• If your child co-mingles their inheritance (e.g., puts it into a joint bank account with their spouse) 

• If inherited property is used to buy marital assets 

• If the inheritance is not kept distinct over time 

In these situations, a court may treat the inheritance as marital property, making it fair a divorce. The line between separate and marital property is thin- and is easily blurred.
 

Strategies to Protect a Child's Inheritance

The best time to protect your child's inheritance is before you die - by working with an experienced estate planning attorney to set up proper legal structures.

1. Use a Trust Instead of a Will

Leaving money to a child outright through a last will and testament means they get full control once the estate is settled. That leaves the inheritance exposed to: 

• Divorce claims 

• Creditors 

• Financial management
  
  Instead, use a discretionary or spendthrift trust that: 

• Delays full access until a certain age 

• Requires trustee approval for distributions 

• Keeps assets legally out of the child's ownership
  
  

2. Create a Bloodline Trust (a.k.a. Legacy Trust)

A bloodline trust ensures your assets stay within your direct descendants, even if your child divorces, dies or becomes disabled.

Features include: 

• Asset protection from in-laws 

•  No risk of inherited money going to an ex-spouse 

• Long-term multigenerational wealth preservation
  
  This is ideal if you: 

• Have significant assets to pass down 

• Want to ensure protection for grandchildren 

• Have concerns about your child's marriage
  
  

3. Encourage a Prenuptial or Postnuptial Agreement

While not always easy to discuss, a prenup (before marriage) or postnup (after marriage) can clearly define inherited assets as separate property.

These agreements: 

• Set expectations early 

• Prevent future disputes 

• Add legal clarity to an inheritance
  
  You can even make distributions from a trust conditional on signing a prenup.
   

4. Use a Lifetime Trust with a Third-Party Trustee

By naming a third-party trustee (instead of your child), you: 

• Maintain full control over how the inheritance is used 

• Avoid the risk of co-mingling 

• Provide protections even if your child remarries
  
  

Trustees can be a trusted relative, friend, or a professional fiduciary. 

You can also allow limited powers of appointment so your child can make some decisions without full control.

5. Be Careful with Real Estate Gifts

If you plan to leave Brooklyn property to your child, think carefully about: 

• How title will be held (individual name vs. joint with spouse) 

• Whether the property should go into a trust
  
  If property taxes or Medicaid planning could affect inheritance. We help structure deeds and real estate gifts to preserve ownership while minimizing risks.

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This document is designed for general information only. The information presented in this document should not be construed to be formal legal or tax advice nor the formation of a lawyer/client relationship. 

For more information on this and other topics, please contact Kevin via any of the channels listed below:

📧 kevin@kmckernan.com  | 📞 718-317-5007