Is an Inheritance Divided in an Ontario Divorce?

If you or your spouse received an inheritance during the marriage, you may wonder whether it must be split if you separate. In many cases the answer is that the inheritance itself is protected, but there are important exceptions.

This article explains the general Family Law Act approach in Ontario, including the family home, tracing, and what applies to common-law partners.

The general rule for married spouses

Property a married spouse acquired by gift or inheritance from a third person after the date of marriage is excluded from net family property. Net family property is the figure used to work out equalization between spouses, so excluded property is generally not shared.

In plain words, the rule looks at where the property came from. A gift or inheritance from someone other than your spouse is treated differently from other property built up during the marriage. Because the rule is tied to marriage, the date of marriage matters, and how it applies depends on your situation, so it is worth confirming with a lawyer.

Property into which an excluded inheritance can be traced is also excluded, except a matrimonial home. For example, if inherited money is moved into another account or asset, it may still be traced and protected, but that depends on the records.

The family home exception

A family home that was inherited or received as a gift is not excluded property, so its value is shared on separation. This surprises many people. Even if the home came to you from a parent, it may still be part of the calculation.

The same applies to inherited money used to buy or improve a matrimonial home: the tracing protection does not cover a matrimonial home.

If an inherited home is involved, it helps to gather records showing how the home was acquired, who lived in it and what was paid toward it. How the home is valued and shared depends on your situation, so a lawyer can confirm the details.

Common-law partners

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. That does not mean there are no rights at all, since other claims may exist, so a lawyer can confirm your position.

If you are in a common-law relationship, it helps to keep clear records of who owns what and where any inherited money went.

When the survivor of a marriage is the one inheriting

A different set of rules applies if your spouse dies rather than separates. When a spouse dies leaving a will, the surviving spouse must elect either to take under the will or to receive the equalization entitlement. The election must be in the prescribed form and filed with the Estate Registrar for Ontario within six months after the first spouse's death. A surviving spouse who does not file in time is deemed to have elected to take under the will or under the Succession Law Reform Act, unless the court orders otherwise.

Ontario's government guidance names the form as the Election of Surviving Spouse and says it must be filed no later than six months from the date of the spouse's death. No distribution may be made from a deceased spouse's estate within six months of death unless the surviving spouse consents in writing or the court authorizes it.

Wills, former spouses and tax

Unless the will shows a contrary intention, a gift to a former spouse, and their appointment as executor or trustee, are revoked after divorce or a declaration of nullity. The will is read as if the former spouse had died before the testator. The rule refers to divorce or a declaration of nullity, so it is worth asking a lawyer how it applies to a will made before you separated.

On the tax side, the CRA lists most gifts and inheritances among amounts that are not reported or taxed. Whether anything else applies to your inheritance depends on the facts, so an accountant can confirm.

What to do next

• Keep records showing when the inheritance was received and where it went.
• Avoid mixing inherited money with joint accounts if you want to keep it traceable.
• Note whether any inheritance was used on the family home.
• Remember the time limit: an equalization claim is six years from separation, or two years from the day the divorce is final, whichever comes first.
• Speak with a family lawyer before signing any agreement.

Frequently asked questions