Are Gifts and Inheritances Shared in an Ontario Divorce?

Many people receive money or property from a parent during a marriage, and then ask whether their spouse can claim half of it if the marriage ends. The short answer is that gifts and inheritances are often treated differently from other property, but there are important exceptions.

This article explains how Ontario treats gifts and inheritances in a property division, what changes if the money was used for the family home or mixed into joint accounts, and what to do next. It is general information, not legal advice.

How property is divided in the first place

Ontario uses an equalization approach for married spouses. Net family property is the value of property at the separation date, minus debts and excluded property, less the same net value at the date of marriage. A negative result counts as zero. The spouse with the larger share pays half the difference as an equalization payment.

Excluded property is subtracted in that calculation, which is why a gift or inheritance can matter so much. Unequal division is allowed only in very special situations where equal division would be extremely unfair.

What counts as excluded property

Excluded property includes property, other than the family home, that was inherited or gifted by someone other than the spouse during the marriage. It also includes insurance money from a death, personal injury money, and property the spouses agree to exclude.

The Family Law Act provision behind this rule has been described by the Court of Appeal as excluding property, other than a matrimonial home, acquired by gift or inheritance from a third person after the date of marriage. The same court has also addressed excluded property into which such funds can be traced.

• Money from a parent that came as a gift or inheritance during the marriage is a common example.
• A gift from your own spouse is not covered, because the rule refers to someone other than the spouse.
• An agreement between spouses to exclude something can also make it excluded.

The family home is treated differently

The big exception is the family home. The full value of the family home is shared even if one spouse owned it before marriage or received it as a gift or inheritance, unless the spouses agree otherwise. Only the house and a small surrounding area count.

The mortgage is deducted at separation but not in the marriage-date calculation. In plain terms, if a parent's gift paid for part of the home you lived in as a family, you should not assume that portion is protected. Whether a cottage or second property counts as a family home depends on how it was used, which a lawyer can help assess.

When the money gets mixed in

Real life is rarely tidy. An inheritance may be deposited in a joint account, used to pay down a joint mortgage, or spent on renovations. The Court of Appeal has addressed excluded property into which gift or inheritance funds can be traced. The question of whether funds can still be identified is called tracing.

There is no simple rule for every case, and the result depends on the facts and the records. Some things generally help, though.

Keep in mind that the same records that help you also help your spouse, so it is wise to get the complete picture before making assumptions.

Timing and what to do next

Court applications for an equalization payment must be made within six years of separation or two years after the divorce is final, whichever comes first. Missing that window can be costly, so do not leave property questions until the end.

• Find the paperwork for the gift or inheritance, such as estate documents, transfer records and letters.
• Collect bank statements showing where the money went after you received it.
• Note whether the money was put into the family home or any joint account.
• Check whether you and your spouse ever signed anything about excluding it.
• Record values for the date of marriage and the date of separation.
• Speak to a family lawyer about tracing and how your facts fit, and note the time limit for applying.

Frequently asked questions