Support: Using Interest Earned from Inheritance in Calculation

In New Jersey, inheritance is viewed as separate property and is not subject to equitable distribution irrespective of when the inheritance is received. Nonetheless, inheritance can play a major role in assigning child support and alimony obligations. Keep in mind, inheritance monies should never be intermingled with joint assets. Always keep your inheritance separate from joint assets to avoid it being subject to equitable distribution.

For example, if the payee has stayed home to raise children and tend to the home, she (typically’) may not receive all she believes she is owed if she has inheritance monies. The fact that inheritance cannot be divided between the parties, does not prevent the interest earned from investing the inheritance being calculated into support obligations. By this, the payee may actually become a “payor” as well, and be forced to contribute to her support or the support of her children through the interest received on her inheritance.

In child support cases wherea parent has received inheritance and invested all or portion of it in nonincome producing asset, or even dissipated it, inheritance and its capacity to produce income may be considered when computing child support. Connell v.Connell, 313 NJ Super 426 (App Div 1998).

Overbay v. Overbay, Wife’s interest earned on inheritance was imputed to her income, and affected the amount of alimony received. 376 NJ Super 99 (App Div 2005).

Stiffler v. Stiffler, Ex-husband could not insulate his inheritance from alimony calculus by investing it in new home, a non-income producing assets. 304 NJ Super 96 (App Div 1997).

Inheritance, which generates no income solely because its owner has altered its capacity to earn interest, should not be automatically exempt from alimony calculus; rather, it is its potential to generate income which is germane. NJSA 2A:34-23

Although inheritance is exempt from distribution, income generated by it is no different than income generated by any other assets, exempt or otherwise, for alimony analysis. Aronson v. Aronson, 245 NJ Super 354 (App Div 1991).

To the extent that is income is generated by the dependent spouse’s inheritance or by any other asset, that income is crucial to the issue of that spouse’s ability to contribute and the need for alimony; that is true whether the spouse chooses to actually receive income or whether, at his or her option, it is plowed back into the inheritance. Aronson v. Aronson, 245 NJ Super 354 (App Div 1991).

On the other hand, what if an ex-spouse decides to take a portion of his/her inheritance money and buy a new home? Since no interest is earned on the invested money, does that which was spent get imputed, or does an estimated interest earned get imputed?

In short, if the purchased home is consistent with the lifestyle once maintained by the parties, it is a legitimate and reasonable use of inheritance monies.

In Stiffler, Defendant purchased home, a non income producing asset, with inheritance monies. Stiffler v. Stiffler, 304 N.J.Super. 96 (App. Div. 1997). The Appellate Division, in dictum, stated,

Whether it is equitable to impute that all of the inheritance should have been invested in a way to generate interest income, some of it or none of it depends upon the circumstances. For example, if a spouse mired in a debt utilized all of an inheritance to retire some or all of that debt it would seem inappropriate for the court to impute an income to that spouse based upon what the inheritance would have earned if invested in a manner calculated to generate interest. By retiring debt that spouse would improve his or her cash flow to the benefit of the other party and indirectly have a positive impact on the spouse’s ability to pay alimony…Certainly it is equitable to conclude that Plaintiff’s use of his inheritance to obtain a home consistent with the marital lifestyle was a legitimate use of the inheritance and a use which would permit an exemption of that item from the alimony calculus. But when Plaintiff used those funds to purchase a $495,000 home when the home he recently left sold for $230,000, it is more than fair for the court to conclude that the funds utilized to increase his lifestyle should be imputed to have been invested so as to generate income.