I sometimes get questions from my clients who are lucky enough to have inherited money from their (less lucky) deceased relatives. They want to know how inheritances are treated in the event that they separate from or divorce their spouses.
The answer is quite straightforward: Under Ontario’s Family Law Act, any inheritance that you receive before marriage is deducted from your list of assets that are subject to net family property calculation and equalization in the event you later divorce. For these purposes the value of the inheritance is calculated as of the date of marriage.
Similarly, if you receive an inheritance during the marriage, it is excluded from your assets as well, as is any property or goods that you purchased with those funds that can be demonstrably and directly traceable to those inherited funds. The value for these purposes is calculated as of the date of separation.
On the other hand, any income that may have been generated by your inheritance may be included in your assets for the purposes of calculating your net family property on divorce – unless the testator or donor of the inheritance has expressly stated that it should be excluded.
Finally, the right to exclude the value of an inheritance on separation and divorce can be lost in some cases: for example if the money is used to invest in the purchase of a matrimonial home, or to pay down a mortgage on a matrimonial home, or where it is spent on vacations or other items no longer in existence on the separation date.
Shulman Law Firm is a Toronto-area firm of experienced Family Lawyers that can provide who can provide practical advice and effective representation in connection with separation and divorce in Ontario. Contact us to set up a free consultation.