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Can a Trust Protect Assets in a New Jersey Divorce?

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Can a Trust Protect Assets in a New Jersey Divorce?

During a divorce, one of the more complex issues that spouses face is the process of dividing their assets between the two of them. During this time, the court looks at the assets within the marriage and divides them based on equitable distribution. This process involves deciphering which assets are considered separate property and marital property. Spouses facing these situations often wonder which properties fall under which category. This is especially so in situations where one spouse has an inheritance through a trust and they do not want to lose it. Continue reading below to learn more about this process and contact an experienced New Jersey divorce attorney. 

Can Inherited Assets be Subject to Equitable Distribution?

When the court divides assets between spouses, they do so based on the process of equitable distribution. This means the assets are divided fairly between both parties. In order to do this, they determine which of the couple’s assets are considered separate property and which are marital property. Marital property consists of assets inherited throughout the duration of the marriage which separate property consists of assets inherited beforehand unless converted into marital property. Under New Jersey law, inherited assets are exempt from equitable distribution and therefore are deemed as separate property. This means it cannot be distributed in whole or in part to the other spouse in the divorce. 

While this is true, it is important to note there is an exception. If an asset is mixed together with a marital asset, it can lose its exempt character. For example, if one spouse receives their inheritance from a trust and deposits it into a joint account with their partner, it is no longer exempt. In addition to this, if income is produced on the inheritance, as well as any growth on inherited assets, they may be subject to equitable distribution.

Can an Inheritance be Used for Support?

There are many situations in which inherited assets are immune from equitable distribution. However, it is important to be aware that this does not mean it cannot be used for purposes of support. This means it can be considered in determining alimony or even child support payments in the event that the two have a child together.

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