My wifes' grandmother died some years back and had a modest estate upon her death. It was always assumed that she would will the estate to her two children and four grandchildren. My wifes' mother fell into bad graces with her mother and was left out of the will, along with my wife and her brother.

My wifes' uncle was now the sole recipient of the estate and there was no stipulation to award monies to my wife, her brother or my wifes' mother. My wifes' mother pleaded with the uncle to make things right. The uncle finally agreed to compensate her, my wife and her brother.

I'm not sure how much her mother was given, but my wife and her brother were given $75,000 dollars. The uncle made a stipulation that the money was to be used towards the purchase of our home. He first made us a check for $15,000 to payoff all our bills. He next made us a check for $40,000 for our down payment on a home. The remainder was to be used for moving expenses.

It is now three years later and my wife and I are getting a divorce. My wife believes that the money paid to us by her uncle should be separated from our estate. I need to know if this money is still considered "Inheritance" falling under Inheritance Laws and does it become a separate entity my wife is awarded?

It's not an inheritance; it was a gift from the uncle. An Inheritance passes by Will and, sometimes, Trust.

The Uncle probably claimed it on his tax returns as a gift - I would check on that.

That's a tricky situation. In some states any inheritance is considered separate property. Also you might have to check to see if the uncle was a beneficiary or an executor on the will. He may have been within his rights to distribute the monies. That you would have to check with an attorney on.
Good luck

If you are NOT a named beneficiary in the Will the Executor or a beneficiary cannot distribute monies to you and claim they are a bequest or distribution from the estate.

For example, you leave your entire estate to your spouse and she/he gives some of the estate proceeds to your children - these are gifts, not inheritances under the Will.

And, yes, an inheritance is "usually" separate property - a moot point here because I do not believe these monies are a bequest.