It might be common knowledge that during a divorce, any increase in value of the property during your marriage must be split evenly. But what if you receive a large gift or inheritance from your family during your marriage? Would this also need to be shared between partners when you split up? The short answer is: it depends.
This article will explain what it depends on and give you a general summary of how the court will treat gifts and inheritances in family law. Keep in mind that this article does not provide full legal advice and if you are in this situation or have any questions, you should consult with a divorce lawyer.
Gifts of Inheritance Before the Marriage
If you received gifts before your marriage, they are treated like other assets you bring into your marriage. They will not be excluded from the property. Their value at the date of the marriage will be deducted from their value at the date of separation. While this means you do not have to share the entire value with your spouse, you will need to split the increase in its value. In some cases, for example, if you used the money to purchase a matrimonial home, the exclusion will be lost.
The only exception would be if the person who gave you the gift explicitly states at the time of giving it that the gift and any increases in the value of the gift are to be excluded.
Protecting Your Gift or Inheritance
To protect or avoid sharing the value of your gifts or inheritances, the two parties can enter into a marriage contract (or prenuptial agreement), where both parties agree upon separation the property will be treated as an excluded asset. This is useful if you own real estate prior to marriage.
Another way you can claim an exclusion, either partially or fully, is to argue for an unequal division in court. Although this is a more complex process and would almost certainly require going to court.
What About Gifts Or Inheritances Received During The Marriage?
If said gifts or inheritances are kept separate from the family property, they can be excluded, including any increases in value. But keep in mind that they must still exist after the marriage. If you spent it or gave it away, it cannot be excluded.
Another example would be if you received an inheritance in cash and you deposited it into your joint account, which was then subsequently used to pay the mortgage or another family expense, the inheritance can no longer be excluded. You must avoid spending the gift or inheritance on family purchases in order to keep it from being equalized.
If you do receive a gift or inheritance, you should keep it in a separate account in your name alone to avoid any problems arising in the future. Any increase in its value will be excluded so long as it is kept separate.
For more information about divorce law or family law services in Ontario, please contact Lloyd & Kemper Family Lawyers today.
