What assets can be excluded from net family property in Ontario?
The Family Law Act lists specific categories of property that a spouse may exclude from their net family property. These include: gifts or inheritances received from someone other than the other spouse during the marriage; income generated by those gifts or inheritances, but only if the donor or testator stated that the income should also be excluded; damages or settlements for personal injury; proceeds of a life insurance policy; and property defined as excluded under a domestic contract (marriage contract or separation agreement).
To claim an exclusion, you must be able to trace the asset — show it came from an excluded source and was kept separate, not mixed with family funds. If you received an inheritance and deposited it into a joint account used for everyday expenses, tracing becomes difficult.
Importantly, the matrimonial home cannot be excluded even if it was acquired with inheritance money, unless you had a prior marriage contract saying otherwise.
Key takeaways
- Inheritances and gifts from third parties can be excluded if properly traced
- Personal injury settlements and life insurance proceeds may also be excluded
- Assets must be traceable to their excluded source — mixing funds complicates this
- The matrimonial home cannot be excluded based on inheritance alone