Divisions Property, Inheritances, and Gifts
There are certain exceptions to your Net Family Property asset calculations. The Family Law Act says that gifts and inheritances might be excluded from property split.
1.) A gift or inheritance
If a gift or inheritance is received before the date of marriage. It will be treated as a pre-marriage asset and will thus be included in the division of property if it still exists at the date of separation.
- Example: Danny was gifted shares in Ford Motors before he married Sandy. Danny’s shares decrease in value from 10, 000 dollars to 5,000 dollars during his marriage to Sandy. Upon separation, Danny and Sandy are each entitled to 2,500 dollars or 50% of the share.
2.) The gift and inheritance must still exist at the time of separation.
If the gift is money, it should be kept in a separate account. If it is spent, it will be harder to trace, and may not be able to be excluded. When money is placed into a joint account or used to purchase the property which is in both parties’ names, the court presumes that it was intended to make a gift for a spouse, per s 14 of the FLA, and only half the money can be excluded.2
- Example: Villanelle receives 300 dollars as a gift, which she places into her joint account with her wife Eve. When they separate, she is only entitled to $150.
3.) If money is placed towards the matrimonial home
(Such as towards renovations or mortgage payments), or if the gift is a home that is moved into as the matrimonial home, it becomes shared property between both spouses. One way to avoid this is to create terms in an enforceable marriage contract, which are agreed upon by both spouses based on independent legal advice.3
- Example: Janet inherits 50,000 dollars after the death of her grandmother. Janet puts half of this money in a separate bank account and uses the other half of this money towards repairing a crack in the foundation of the matrimonial home where she lives with her husband Brad. Upon her separation from Brad, Janet is only able to claim the half which she put in the separate account.
4.) Gift/Inheritance money can be used to purchase property
However, if it is combined with other funds towards the purchase of property, it may be more difficult to trace back.4
- Example: Elio receives 5,000 dollars from a friend during his marriage to Oliver. Elio uses the money to purchase a watch. Upon Elio and Oliver’s separation, Elio gets to keep the watch.
5.) The value of the gift or inheritance
This amount may be higher or lower than the value of the item when it was acquired.5
6.) Income from a gift or inheritance (like rental payments or stock dividends)
Is only excluded if the person who gave it specifically indicates in writing that it should be excluded from the division of property.6
- Example: Charity is gifted a house by her father after she marries Oscar. Charity and Oscar chose to live in another property as their matrimonial home and to rent out the gifted house. Upon Charity and Oscar’s separation, Charity is entitled to the house, but Oscar and Charity are equally entitled to rental payments.
Whether you are considering divorce or not, you can receive more detailed information and advice on the exclusion of Inheritances and Gifts from one of our Family Lawyers. You can reach our office at 905-366-0202 or contact us through our website here.