In the course of the average lifetime, it will usually not be often that you find yourself inheriting significant sums of money after a loved one or close friend has died.
Still, the situation does sometimes arise, and you may wonder how that inherited money is treated by law, in the event that you and your spouse divorce.
As we wrote some months ago in an article on how inheritances are dealt with in divorce, the answer depends on when you received the inheritance.
Under the provisions of the Ontario Family Law Act, if you received it prior to getting married, then the value of the inheritance at the date of marriage gets deducted from your individual Net Family Property (NFP) amounts. However, any increase in the value of that inheritance during the marriage will become part of your NFP.
On the other hand – and very similar to what I wrote about the treatment of gifts received during marriage – if your received an inheritance after you and your Ex got married, its value as of the valuation date (which is usually, but not always, your separation date) will be excluded from your NFP. And since the exclusion is calculated at the valuation date, this means that any increase in value over the course of the marriage is also excluded.
However, the treatment of inheritances also comes up in the context of whether and how much spousal support you might have to pay to your Ex. Here are some points to know:
- If you are separated or divorced from your Ex, he or she is not automatically entitled to claim a portion of any inheritance you later receive.
- However, if after separation or divorce you have been ordered by a court to pay spousal support to your Ex, the fact that you have come into an inheritance may be a factor that amounts to a significant change in circumstances, and one that entitles a court to revisit your support obligation.
- Similarly, if your Ex receives an inheritance after divorce, this may also be grounds for a court to reduce the amount of support he or she is entitled to receive from you.
- With that said, it should be noted that potential inheritances (i.e. those that are contingent upon the future death of another person) do not count.
Do you have questions about how inheritances are dealt with in Ontario Family Law? Do you have a specific scenario in mind? Contact us for a free consultation.