Written in conjunction with Tailor Law
Separation and divorce are sadly part of life. They happen. However, it's important to understand the laws surrounding the dividing of assets. The Family Law Act in Ontario excludes specific property from the net family property calculation. Net family property is the value of each spouse's assets at the time of separation (minus debts and liabilities) and deducting the value of property brought into the marriage (aside from the house). Typically assets are divided 50/50, but equalization payments may need to be made in the case of a significant imbalance between each spouse's net family property.
The Family Law Act says that gifts and inheritances can be excluded from property division, but there are certain conditions.
To be excluded, gifts and inheritances must be received after the date of marriage.
Anything received before marriage is considered pre-marriage assets and will be included in the property division. For example, if one spouse enters the marriage with shares of stock, the value of those stocks will be equally divided when they separate.
Gifts and inheritances must still exist at the time of separation.
Any money resulting from a gift should be kept in a separate account. If it's placed in a joint account, the courts will only allow half the funds to be excluded from the division of property. For example, if you receive $500 as a personal gift but place it into a joint account with your spouse's name on it, you're only entitled to $250 upon separation.
Money from gifts placed towards the marital home can't be excluded.
If you put gift/inheritance money into the matrimonial home — or if the house itself is a gift — then it becomes shared property. For example, if you inherit $30,000 and use half of it for renovations but stick the other half in a personal bank account, you're only entitled to the money in the personal account. However, this can be avoided if specific terms are agreed upon in a marriage contract.
Gift/inheritance money can be used to purchase property (other than the marital home).
If you buy property with the money you received as a gift — and only with that money — it can be excluded. However, if you combine that gift money with other funds to purchase property, then it's hard to prove it's only yours.
The excluded value of a gift or inheritance can only be the current value at the date of separation.
Regardless of how much the item cost when it was first acquired, the value that's excluded is what it's worth when you separate.
Any income from gifts or inheritance can only be excluded if it's specifically indicated in writing by the person who gave it.
So, for example, if your spouse's father gifted them property after you married, but stated in writing that it was explicitly for your spouse, then you are not entitled to the property.
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