Pursuant to New York law, monies inherited from a third party are separate property, and are not subject to distribution between spouses (NY Domestic Relations Law §236-B (1) (d) (1)). However, a court can take into account the separate property assets of one spouse when determining equitable distribution ((5)(d)(1)). For example, if the marital estate is worth $100 Thousand and one party has separate property of $100 Million and the other has no separate property, the court may take into account Spouse 1’s wealth when distributing the $100,000 and perhaps not make it an equal distribution.

Sometimes people try to outsmart the system. In Castelloti vs. Free 138 A.D.3d 198 (1st Dept. 2016), the Husband’s mother altered her Will so only her daughter would receive an inheritance . There was a handshake agreement between the Husband and Sister that once his divorce was completed, he would receive half of the inheritance and in return pay the mother’s estate taxes. Surprisingly (or not) when Mom passed away Sister decided to not turn over Husband’s share to him. Husband brought an action against Sister based upon breach of contract and unjust enrichment. Basically, as there was no contract in writing, the court found that it violated the Statute of Frauds (i.e., nothing in writing) and the trial court dismissed the action in its entirety. The Appellate Division reversed and allowed the Husband to proceed by the unjust enrichment cause of action.

Lesson learned? Well, (1) when you lie down with dogs, as the expression goes, you wake up with fleas. (2) Husband could have protected his inheritance as it was his separate property. I do not know what happened after the Appellate Division ruling or if the Husband was eventually successful against Sister, and I wonder whether Wife pursued any action against Husband for his fraudulent behavior.

If you are trying to “outsmart” the system, you should speak to a lawyer and find out if what you are seeking to do is actually possible, or if it may wind up coming back to bite you. Wouldn’t it be a kick if Husband lost his inheritance?

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