Is an Inheritance Shared With a Spouse on Separation in Ontario?

You have inherited money or property from a parent, grandparent or other relative, and your relationship is under strain. A natural worry is whether your spouse can claim half. The answer depends on what you inherited, what you did with it, and whether you are married or living common-law.

This article explains the main Ontario rules for married spouses, the important exception for the family home, how common-law partners are treated, and the time limit for making a claim. It is general information, not advice on your situation.

The general rule for married spouses

When a married couple separates, Ontario's Family Law Act looks at what each spouse owns and owes, and the result is called net family property. Certain kinds of property are left out of that calculation. One of them is property a spouse received by gift or inheritance from a third person after the date of the marriage.

In plain words, an inheritance that comes to you from someone other than your spouse, after the wedding, is generally not counted when the couple divides their property. The same is true of gifts from third persons. Two points matter here: the money must come from a third person, and it must arrive after the marriage date.

Being excluded does not mean the inheritance is ignored in every way. It simply means it is not part of the figure that gets equalized. How the rule applies to your facts, including what counts as the date of marriage, is worth confirming with a lawyer.

Tracing: what happens when you spend or move the money

Inherited money rarely stays in one account forever. The Act deals with this through tracing: property into which an excluded inheritance can be traced is also excluded, except a matrimonial home. For example, if you use inherited money to buy an investment, that investment can remain excluded as long as the link back to the inheritance can be shown.

The practical difficulty is proof. If inherited funds are mixed with joint savings or household income, it can become hard to show what came from where. Clear records make it much easier to support an exclusion.

• Keep the estate paperwork showing what you received and when.
• Deposit inherited money in an account in your own name, not a joint account.
• Avoid mixing it with salary or household funds.
• Keep statements showing where the money went if you buy something with it.

The big exception: the matrimonial home

The tracing rule has an important carve-out. Property into which an inheritance can be traced is excluded, except a matrimonial home. Ontario's government guidance puts it this way: a family home that was inherited or received as a gift is not excluded property, so its value is shared on separation.

This catches many people by surprise in two situations.

• You inherit a house and the family lives in it. It is not excluded, so its value is shared on separation.
• You use inherited money to buy a family home or pay down its mortgage. Because the exclusion for traced property does not apply to a matrimonial home, that part of the inheritance may no longer be protected.

If you are thinking of putting inherited money into the family home, speak to a lawyer first. How much of the home's value is affected, and whether anything can be done to address that in advance, depends on the facts.

Common-law partners are treated differently

The Family Law Act property-division rules do not apply to common-law couples. They are not legally required to split property acquired while living together. So the net family property calculation, and the exclusion for inheritances, is not the framework that applies to an unmarried couple.

That does not mean a common-law partner can never make a property claim. Other legal arguments may be available depending on how property was owned and paid for, and those turn on the facts. If you are in this situation, a lawyer can explain what may apply.

Time limits and what to do next

A claim to equalize property on separation has a limit. It is six years from the day of separation, or two years from the day the divorce is final, whichever comes first. Because the divorce route can be shorter, do not assume you have the full six years once your divorce is final, since the two-year period runs from that day.

• Write down the date of marriage and the date of separation.
• Gather the estate documents showing what you inherited and when.
• Keep inherited funds in an account in your own name and avoid mixing them.
• Keep records of anything you bought with inherited money.
• Get advice before putting inherited money into a family home.
• Note the time limit for an equalization claim and diarize it.

If you are the spouse of someone who has inherited, the same steps apply in reverse: keep track of dates and records, and ask a lawyer whether the home or any traced property is affected.

Frequently asked questions