An inheritance or a serious medical diagnosis can change a family’s financial outlook overnight. Both can also raise deeply personal questions about ownership, responsibility, and what money should accomplish.
If your husband inherits $450,000 from his mother, does being married mean half belongs to you? If you are 56, have $1.7 million, and receive a likely terminal diagnosis, should you spend freely while you still can?
These situations are very different, but they share one important principle: planning should come before major financial decisions.
Does Your Spouse’s Inheritance Automatically Belong to You?
Generally, no. In New York, an inheritance received by one spouse from a parent or another third party is generally treated as that spouse’s separate property rather than marital property subject to division in a divorce. New York Domestic Relations Law § 236. The New York Appellate Division applied that distinction to inherited funds retained in an account in the inheriting spouse’s name in Louie v. Louie, 203 A.D.3d 1520 (3d Dep’t 2022). New Jersey likewise generally excludes an inheritance received by one spouse from equitable distribution in divorce. N.J. Stat. Ann. § 2A:34-23; Gibbons v. Gibbons, 86 N.J. 515 (1981). Marriage alone does not give the other spouse ownership of the inheritance.
In the $450,000 example, the wife does not automatically become entitled to half of the money or acquire the right to direct how her husband spends it simply because they are married.
However, that is the starting point, not necessarily the end of the analysis. What happens to the money after it is inherited can become just as important as where it came from.
How an Inheritance Can Become a Marital Property Issue
Inherited money does not always remain neatly separated from the rest of a couple’s finances. A spouse may deposit it into a joint account, use it toward a jointly owned home, or combine it with marital savings.
Those decisions can create questions about whether the recipient intended to share the inheritance and whether the original funds can still be identified. Joint ownership, the movement of money, and the way the couple uses the asset can all affect the outcome. In New York, an inheritance deposited into a jointly titled account can give rise to a rebuttable presumption that the funds are marital property. Candea v. Candea, 173 A.D.3d 663 (2d Dep’t 2019). New Jersey’s statutory exclusion for inherited property expressly does not exclude interspousal gifts. N.J. Stat. Ann. § 2A:34-23.
It is therefore too simplistic to say that every deposit into a joint account automatically converts every dollar into marital property. It is equally risky to assume that inherited money will remain protected regardless of how it is handled. New York courts recognize that the presumption arising from a joint deposit can be rebutted under the applicable evidentiary standard. Yuliano v. Yuliano, 175 A.D.3d 1354 (2d Dep’t 2019).
For someone who wants to preserve an inheritance as separate property, the practical approach is to maintain clear records and obtain legal advice before transferring ownership or combining the funds with shared assets.
New York law also distinguishes the inherited asset from certain increases in its value. Appreciation attributable in part to the other spouse’s contributions or efforts may receive different treatment from the underlying separate property. New York Domestic Relations Law § 236; Hartog v. Hartog, 85 N.Y.2d 36 (1995).
The question is not simply, “Was this inherited?” It is also, “What happened to it afterward?”
A Surviving Spouse’s Rights Are a Different Question
Ownership during marriage and inheritance rights after death are separate legal issues.
An asset may remain one spouse’s separate property during the marriage while still becoming relevant to the surviving spouse’s rights when the owner dies.
New York generally gives an eligible surviving spouse an elective share equal to the greater of $50,000 (or the net estate’s value, if smaller) or one third of the net estate, with statutory adjustments and rules governing what property is included. New York Estates, Powers and Trusts Law § 5-1.1-A. New Jersey provides an elective share based on one third of the augmented estate, subject to its own limitations and conditions. N.J. Stat. Ann. § 3B:8-1. In New Jersey, the surviving spouse’s own property and certain benefits received upon the decedent’s death are credited toward the share. In re Estate of Cole, 200 N.J. Super. 396 (Ch. Div. 1984). These are not interchangeable systems, and eligibility, waivers, and filing requirements matter.
For that reason, “It is my separate property” does not necessarily mean “My spouse can never have a claim to it after my death.”
An estate plan should address both who owns an asset today and what should happen to it later.
A Terminal Diagnosis Does Not Make Financial Planning Less Important
Now consider the second scenario: a person is 56, has $1.7 million, and learns that a brain tumor is likely terminal.
The understandable reaction may be to stop worrying about tomorrow and start spending. There is nothing wrong with wanting comfort, meaningful experiences, or time with loved ones. But a spending spree should not be the first financial decision.
The better question is: How can this money support the life you want while preserving the care and assistance you may need?
A thoughtful plan should account for uncertainty rather than assume that either the shortest or the longest possible timeline will occur.
Put Decision Makers and Documents in Place
A serious diagnosis is a reason to review legal and financial arrangements promptly, while the individual can participate meaningfully in the process.
Depending on the circumstances, that review may include:
- A last will and testament.
- A revocable living trust, if appropriate.
- A durable financial power of attorney.
- A health care proxy or other document appointing a medical decision maker.
- A living will or other instructions concerning treatment preferences.
- Authorizations allowing appropriate access to medical information.
These documents serve different purposes. A will addresses the disposition of property after death. A durable financial power of attorney allows an appointed agent to handle authorized financial matters if the individual becomes unable to do so. Health care directives address medical decisions and treatment preferences.
The people named in these documents matter as much as the documents themselves. The National Institute on Aging recommends making sure that the person selected to make health care decisions is willing to accept that responsibility.
For financial matters, consider who is organized, trustworthy, available, and capable of following instructions during a difficult time. Naming someone solely because that person is the oldest child or closest relative may not produce the best result.
Build a Care Budget Before a Spending Budget
Rather than immediately deciding how much to give away or spend, begin by identifying what must remain available.
A useful planning discussion with the treating team, a financial adviser, and an attorney should address:
- Current household expenses and outstanding obligations.
- Expected treatment expenses and insurance coverage.
- Possible home care, transportation, or residential care needs.
- Financial support for a spouse or other dependents.
- Money that should remain readily accessible.
- A reserve for changes in care needs or a longer period of support.
The goal is not to predict every expense perfectly. It is to avoid making irreversible decisions before understanding the resources needed for personal security.
The National Institute on Aging specifically recommends organizing information about income, assets, insurance, and important legal documents so that trusted people can locate and use it when necessary.
Leave Room for Enjoyment Without Sacrificing Security
Once care needs and essential obligations have been considered, the conversation can turn to enjoyment.
Perhaps the priority is a family trip. Perhaps it is spending more time at home with help in place, supporting a meaningful cause, or creating memories with children and grandchildren.
The objective should not be to preserve every dollar at the expense of living. Nor should it be to spend everything simply because the future is uncertain.
A useful approach is to identify what matters most, estimate the cost, and establish a defined amount for those experiences. Major gifts or unusual changes to an estate plan deserve a separate discussion with legal and tax advisers before they are completed.
Make the Plan Usable for the People Who Will Help
Even a carefully prepared estate plan can be difficult to carry out if nobody knows where the documents are or whom to contact.
Organize the information your decision makers may need, including account details, insurance policies, professional contacts, and the location of original legal documents. Discuss medical preferences with the people involved, and make sure appropriate permissions are in place for caregivers and professionals to communicate.
Beneficiary designations also deserve attention. Designations on retirement accounts, insurance policies, and certain other assets may control who receives those assets rather than the instructions in a will.
Funeral preferences and a plan for handling digital accounts are also worth addressing so that loved ones are not left guessing.
Protect Your Choices Before a Crisis Makes Them Harder
An inheritance raises questions about ownership. A serious diagnosis raises questions about care, control, and legacy. In both situations, the most useful legal work begins before money is transferred, promises are made, or important decisions become urgent.
At The Law Office of Barry E. Janay, P.C., we approach these conversations with empathy and practical judgment. The goal is to help clients understand their choices, protect their interests, and create plans that reflect the people and priorities that matter most.
Barry E. Janay, Esq., is Founder and Principal of The Law Office of Barry E. Janay, P.C., a New York and New Jersey firm handling trusts, estates, business law, and litigation.
This article provides general information about estate planning in New York and New Jersey. It is not legal, medical, investment, or tax advice. Individual circumstances and applicable law determine the appropriate approach.
Barry E. Janay, Esq. is a seasoned New York and New Jersey attorney with over 20 years of legal experience, focusing on estate planning, probate, business law, and complex legal matters. As the founder of The Law Office of Barry E. Janay, he provides strategic, results-driven legal guidance to individuals and businesses navigating high-stakes decisions.
Barry has served as senior counsel and general counsel across multiple industries, bringing deep expertise in regulatory compliance, contracts, and corporate strategy. Known for his direct, no-nonsense approach, he helps clients resolve legal challenges efficiently while protecting their long-term interests.
He is admitted to practice in New York, New Jersey, and multiple federal courts, and has been recognized for his professional excellence and client-focused advocacy.
