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Gifts, inheritances and other excluded property

Region: Ontario Answer # 112

In Ontario, the Family Law Act excludes certain property from the net family property calculation. Net family property is the value of each spouse’s property, after deducting debts and liabilities at the time of separation, and then deducting the value of assets brought into the marriage (other than the matrimonial home). The value of each spouse’s net family property will be calculated and then compared, to determine whether an equalization payment needs to be made. Generally, a spouse should receive half of the overall net family property in addition to their excluded property.


What property is excluded?

Generally, the following property does not need to be shared upon marriage breakdown:

  • gifts, given to only one of the spouses, from a third party,
  • inheritances, given to only one of the spouses,
  • increase in the value of gifts and inheritances, where the donor expressly stated that the gift or inheritance was to be excluded from the spouse’s net family property,
  • increase in the value of property (other than a matrimonial home) where the property can be traced to an excluded property,
  • money received as a result of a personal injury claim,
  • proceeds of a life insurance policy, paid or payable on the death of the insured,
  • property that the spouses agreed to be excluded in a marriage contract.

Gifts and inheritances will be excluded from a spouse’s net family property if they were received from a third person after the date of the marriage, and the donor must have expressly intended to give the gift or inheritance to the spouse alone, rather than to the family as a whole. Generally, any increase in the value of such gifts is not shared. If the gift or inheritance is not shareable, then if it is sold or transferred into another asset, that asset also belongs to the one spouse alone. In addition, any proceeds of sale of such excluded property or traced property should also qualify as excluded property.

In contrast, gifts or inheritances received before marriage are not simply excluded from the net family property calculation, but their value at the date of marriage is deducted from the spouse’s net family property, and the increase in its value will be subject to sharing.

Gifts received from a spouse are included as part of net family property.

When will excluded property be included in net family property?

Excluded property can be included in net family property if it has become intermingled with other family assets, such as the matrimonial home or family money. For example, if a spouse purchased property with money received as a gift, that spouse would have to show that the property was bought exclusively with gift money. This could be particularly difficult if the money was withdrawn from the family’s joint account. If the spouse cannot prove that the property was bought exclusively by gift money, the new property will no longer be considered excluded property, and therefore, will be included in the spouse’s net family property. The onus to prove the gift, is upon the person making the claim of having received it.

Furthermore, excluded property may have to be included in the spouse’s net family property if the other spouse can show that they had a common intention to share the benefit of the excluded property, such as through the common use of property purchased with the excluded property. Finally, interest or income derived from excluded property during the time of the marriage will only be excluded from the net family property if the donor expressly stated that it was to be excluded in a document of gift. Such a document could be a Will or a simple written statement. If a court finds that property does not belong exclusively to one spouse then that property, or a part of its value, will be included in the spouse’s net family property. For more information, refer to the Ministry of the Attorney General.

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Protect yourself and your children

When going through a separation, divorce or child custody it is important to make sure you are protecting your and your children’s financial future. Consider including a life insurance policy and investment plan as part of your separation agreement. This protection can help with your living expenses, mortgage payments, and your children’s education. For help, contact an Empire Life advisor today.”

Getting advice and the legal help you need

If you are about to separate, have recently separated, or are planning to get a divorce, a lawyer can help you understand your legal rights and ensure that your interests are protected. Each spouse should acquire independent legal advice. Even if you and your spouse agree on property, child custody and support, you should consult a lawyer to make sure you both know your legal rights and obligations. If you and your spouse do not agree on how to divide property, how much support needs to be paid, or who will have custody of your children, a lawyer will be able to provide you with specific legal advice for your situation. Agreements reached without independent legal advice may not be legally binding. It is advisable to get the legal help that’s right for you. If you are considering representing yourself in a family law matter, you may wish to get help from The Family Law Coach. Their experienced family law lawyers can provide information, legal assistance, advice and practical tips to help you prepare your case and improve your outcome. They provide specific services for fixed prices, and you only pay for the services you want. If you are considering hiring a lawyer to represent you, for legal advice and assistance regarding separation, divorce and other family law matters, contact a family law lawyer.


Retirement ready?

You want to balance your mortgage, kids’ education, and retirement savings. Are you saving enough to meet your goals and be ready for retirement? An advisor has the expertise to get you on track to achieve your long-term goals, and can help you set realistic planning targets and stick to your plan. Contact an Empire Life advisor today for more information.

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