What property is excluded from equalization when married spouses separate in Ontario?

Under the Family Law Act, certain types of property are excluded from a spouse's net family property calculation, meaning their value does not factor into what must be equalized. The main categories of excluded property are: gifts and inheritances received from a third party during the marriage (but not the income earned on those gifts); damages or settlements received for personal injury; life insurance proceeds; and property agreed to be excluded in a marriage contract or cohabitation agreement.

There is a key exception: if excluded property was used to purchase or pay down the matrimonial home, it loses its excluded status. This is a common surprise for spouses who used an inheritance to renovate or pay off the family home, only to find that money is no longer separately traceable.

To claim an exclusion, the spouse claiming it must prove the excluded property exists, what it was worth, and that it meets the criteria. Keeping records — such as the will, gift letter, or bank statements showing the money came from a specific source — is important.

If you received a significant inheritance or gift during the marriage, discuss it with a lawyer when working through equalization to ensure you are properly claiming any exclusion you are entitled to.