Sure, inheritances during a divorce are exempt from equitable distribution (as long as you follow certain rules such as not commingling said funds with marital monies); however, you probably did not know that they are not entirely exempt when it comes to purposes surrounding your child support and alimony issues.
In Penza v. Penza, the trial court concluded that a Wife’s inheritance of $700,000 was a prima facie showing of changed circumstances thereby granting the Husband’s application for a downward modification in child support. The parties were therefore ordered to exchange discovery (financial information), specifically, both Husband and Wife were directed to exchange tax returns, W-2’s, 1099s, and a list of all income-producing assets. Accordingly, Husband produced his 2013 tax returns, W-2, and 1099; but failed to provide a list as Husband’s counsel asserted that he did not have any “income producing assets”. Wife, too, produced her tax returns; however, she did not provide any W-2’s and / or paystubs. Further, although she acknowledged receiving an inheritance, she failed to insert same on her CIS and failed to disclose any details surrounding said inheritance (such as the total amount, any dividends received, where it was deposited, etc.).
Given Wife’s lack of disclosure regarding her inheritance, the court drew an adverse inference from same and determined that she indeed received $700,000 from an inheritance (which was the Husband’s pure speculation) and that Wife was receiving a 5% return, yielding approximately $35,000 in annual income. Additionally, he imputed an additional $36,000 to Wife, despite her insistence that she only earned approximately $15,000 from her business. The court noted that the $36,000 imputation was fair, since Wife certified that she was spending more than $20,000 per year in child care. Naturally, this amount in child care led the Court to believe that Wife was earning substantially more than she had disclosed.
As a result of the Wife’s income from her inheritance as well as her imputation of $36,000, the trial court reduced Husband’s child support obligation. The Wife appealed the trial court’s decision and the Appellate Division confirmed the trial court’s Order. The Appellate Division agreed that it was appropriate to impute income to the Wife as her financial disclosure was incomplete and she even failed to disclose the balances of the investment accounts that she inherited from her mother despite conceding that she did, indeed, receive an inheritance.
As such, the lessons learned in this case are twofold: first, inheritances are a prima facia showing of changed circumstances, which can trigger a modification of support; and, secondly, always be honest while preparing your Case Information Statement, otherwise, it will only lead you to more harm in the end. Be sure that when you and your attorney file your Case Information Statements and any other documentation reflecting or substantiating your income that same is complete and accurate. It is extremely specious to the courts when you refuse to accurately and fully disclose your earnings, unearned income, inheritances (or any other income producing assets) and the like.