Inheritances & Gifts
Ontario Division of Property Legislation
The value of gifts or inheritances that you or your partner received during your marriage are excluded from the division of property upon separation or divorce. You may not know, however, that you have to treat those gifts or inherited items in a specific manner in order to take advantage of that exclusion.
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Keep Gift & Inheritance Money in a Separate Account
First, you have to be able to show that the gift or inheritance is still in existence at the date of separation. Otherwise, there will be nothing to exclude. Therefore, if the gift or inheritance comes in the form of cash, you should always keep that money separate.
Open a separate account for the money, use it to buy stock which you keep separate from your other investments, or lock it into a long-term investment. If you place that cash into your regular chequing or savings account and it is mixed in with the rest of your funds—some of which are spent over time—then you will be unable to show which portion of that account can be traced back to the inheritance or gift. When this happens, it creates complicated accounting issues and part of the exclusion will most likely be lost.
Furthermore, if you place that money into a joint account or use it to purchase property which you then place in both of your names, then the court will presume you intended to make a gift of half of that money to your spouse, as per section 14 of the Family Law Act. You can then only exclude the half that is still yours.
Do Not Use Gifted Money or Inheritance for the Matrimonial Home
Most importantly, you should never put gifted or inherited money toward the matrimonial home and, if you inherit or are gifted a home, never move into it as a matrimonial home.
The Family Law Act treats the matrimonial home differently from all other property. Its value will always be shared between the spouses unless a valid domestic contract stipulates otherwise. Therefore, if you use inherited money to pay down your mortgage; as a down payment on your home; on a home line of credit; or even on renovations for the home, then you will no longer be able to exclude those funds.
See our article "The Matrimonial Home" for more information about the unique treatment of the family home under the law.
Using Gifts/Inheritance to Purchase Property
You do not need to keep the gift or inheritance in the same form in which it was received. You can use cash from a gift or inheritance to purchase any property (other than a matrimonial home) and still maintain your right to exclude that portion of the item that can be traced back to the original gift.
Tracing can be somewhat complicated, however, if the item was purchased with a combination of inherited or gifted funds and other family funds.
For example, if you inherit $20,000 and use it to purchase a vintage sports car for $30,000 and the value of that car has increased to $40,000 at the date of separation, then you will be able to exclude the portion of the $40,000 that can be traced back to the original $20,000 gift. Generally, since 2/3 of the car at the time of purchase was traceable to the gift, then 2/3 of the current value of $40,000 would be excluded.
What Was the Value of the Gift/Inheritance at the Time it Was Received?
Remember that it is the value of the gift or inheritance at the date of separation that will be excluded.
If you inherited art that is worth more on the date of separation than it was at the time it was gifted, then it is the separation date value of that art that will be excluded. The same rule holds if the item has lost money since the date of inheritance.
However, income from a gift or inheritance is not excluded unless the person giving it has specifically indicated in writing that income from the gift is also to be part of the gift and excluded from net family property. Therefore, rental income from a rental property; interest on money in savings; or dividends from stock will have to be included in your date of separation assets.
Pre-Marital Gift & Inheritance Money
If you acquired a gift or inheritance before marriage that appreciated during the marriage, then the value acquired during the marriage will need to be included in your net family property, because there is no special treatment accorded to gifts or inheritance received before the date of marriage. The pre-marriage value of a gift or inheritance will be deducted from your net family property like any other pre-marriage asset.
See our article "Equalization and How it Is Calculated" for more information.
Contact an Ontario divorce lawyer at (905) 581-7222 to learn more! Feldstein Family Law Group P.C. serves clients across Ontario, including in Newmarket, Aurora, King City, and the entire the York Region, as well as Unionville, Thornhill, Kleinberg, Woodbridge, Richmond Hill, and beyond. We have offices in Vaughan, Mississauga, Oakville, and Markham to serve you.
Andrew Feldstein Founder
Andrew Feldstein graduated from Osgoode Hall Law School in 1992. Prior to focusing exclusively on family law, Andrew’s legal practice covered many different areas, including corporate commercial. One of Andrew’s fundamental objectives is to achieve those goals mutually and collaboratively, as set out by him and his client.
Daphna Schwartz Lawyer
Daphna Schwartz joined Feldstein Family Law Group, P.C. in 2007 as an associate lawyer. She was previously practising family law in the Barrie area. Her practice includes all areas of divorce and family law, including custody and access, child support, spousal support, and property issues. Daphna is also qualified to practise Collaborative Family Law.
Anna Troitschanski Lawyer
Anna Troitschanski joined the team at Feldstein Family Law Group, P.C. in 2012. Prior to that, she practised Family Law at a boutique Newmarket firm. Her experience covers all areas of divorce and family law, including custody and access, child support, spousal support, and division of property.
Nick Slinko Lawyer
Nick Slinko attended York University from 2003 until 2007 where he majored in both Law & Society and Philosophy. Nick graduated in 2007 with an Honours Bachelor of Arts degree. He proceeded to earn a Juris Doctor in Law at the University of Western Ontario in 2011. Nick was Called to the Bar in June of 2012 after completing his Articling term with the Feldstein Family Law Group, P.C. He became an associate with the firm immediately thereafter.
Veronica Yeung Lawyer
Veronica Yeung joined the Feldstein Family Law Group, P.C. as a summer student in 2014 and returned as an articling student in 2015. Following her call to the Ontario Bar in June 2016, Veronica was welcomed to the team as an associate lawyer.
Veronica attended York University for her undergraduate studies and graduated as a member of the Dean’s Honour Roll when she obtained her Bachelor’s degree in Honours Criminology.
Shana Gordon-Katz Lawyer
Shana joined Feldstein Family Law Group P.C. as an articling student in 2017. Following her call to the Ontario Bar in June 2018, Shana was welcomed back to the firm as an associate. While completing her articles, Shana assisted with legal matters covering all areas of family law.
Shana attended the University of Western Ontario for her undergraduate studies, where she graduated as the gold medalist of her program, Honors Specialization in Classical Studies.
Rachel Zweig Lawyer
Rachel joined Feldstein Family Law Group P.C as a Summer Student in 2019 and returned as an Articling Student in 2020-2021. Following her Call to the Ontario Bar in April 2021, Rachel was welcomed back to the firm as an Associate.
Prior to completing her legal studies and obtaining her Juris Doctor at the University of Ottawa, Rachel obtained her Bachelor’s Degree at Ryerson University with a major in English Literature.
Lauren Harvey Associate Lawyer
Lauren joined Feldstein Family Law Group as a Summer Student in 2020 and returned as an Articling Student in 2021-2022. Following her Call to the Ontario Bar in April 2022, Lauren was welcomed back to the firm as an Associate.
Prior to completing her legal studies and obtaining her Juris Doctor at the University of Western Ontario, Lauren obtained her Honour’s Bachelor of Arts Degree at Wilfrid Laurier University majoring in Criminology and minoring in Law and Society.
Quinn Held Associate Lawyer
Quinn spent two years as a Summer Student and then completed her Articling term at a boutique Family Law firm in Orangeville, where she was exposed to various complex Family Law matters. Following her Call to the Bar of Ontario in June 2022, she became an Associate with the Feldstein Family Law Group.
Prior to obtaining her Juris Doctor from the University of Windsor, Quinn obtained her Honour’s Bachelor of Arts Degree at the University of Guelph majoring in Criminal Justice and Public Policy and minoring in International Development.