Do You Have to Share an Inheritance on Separation in Ontario?

If you have received an inheritance, or expect one, it is natural to wonder whether your spouse could claim part of it if your marriage ends. The answer in Ontario is often reassuring, but it depends on what you do with the money and how you are connected to your spouse.

This article explains the general rule, the important exception for the family home, and what changes for common-law couples. It also covers the time limits and tax points that come up. It is general information, and your own facts matter.

The general rule: inheritances are excluded

When married spouses separate, Ontario's Family Law Act looks at each person's net family property and equalizes the difference. Property you acquired by gift or inheritance from a third person after the date of the marriage is excluded from your net family property. A third person means someone other than your spouse, such as a parent, relative or friend.

In plain terms, an inheritance you received during the marriage generally does not get counted when the couple's property is divided. That is different from most other things you own.

Tracing: what you buy with the inheritance

The exclusion does not stop at the cash. Property into which an excluded inheritance can be traced is also excluded, except a matrimonial home. For example, if you can show that an investment account was funded from inherited money, that account may stay outside the division.

The word "traced" matters. Mixing inherited money with joint savings or everyday spending can make it hard to show where it went, so how you handle the money affects how easily you can prove the exclusion.

The big exception: the matrimonial home

A family home that was inherited or received as a gift is not excluded property, so its value is shared on separation. The same carve-out applies when inherited money is traced into a matrimonial home.

• Inheriting a house and then living in it as the family home can bring its value into the division.
• Using inherited money to pay down the mortgage or renovate the family home can have the same effect.
• Inherited money placed in a separate investment, kept apart from joint funds, is generally treated differently from money placed in the home.

How the rules apply to a particular home, including how much of its value is shared, depends on the facts. A lawyer can confirm this before you make a large decision.

Common-law partners, time limits and tax

The Family Law Act property-division rules do not apply to common-law couples, who are not legally required to split property acquired while living together. Other legal claims may still be possible, so it is worth getting advice if this is your situation.

Because the two-year and six-year periods run separately, do not assume you have the longer one. Check which deadline applies to you.

What to do next

• Keep the estate documents that show who left you the money and when you received it.
• Deposit inherited money in an account of its own rather than a joint account.
• Keep bank statements and receipts that show where the inherited money went.
• Think carefully before putting inherited funds into the matrimonial home, since that can make the value shared.
• Note the date of separation and any divorce date so you can track the time limits.
• Speak with a family or estates lawyer before a major move, especially if you are already separating.

Frequently asked questions