Family Law Lawyer in Vaughan, GTA

How Inheritance Is Treated in Divorce Under Ontario Family Law

This is general information and should not be interpreted as legal advice. Contact a family law lawyer to understand your rights and obligations.

Inheritance can be a significant source of confusion and conflict during a divorce. Many separating spouses assume that an inheritance automatically belongs to the person who received it, but under Ontario family law, the treatment of inheritance depends on how it was handled during the marriage. Understanding the rules can help you protect your interests and avoid costly disputes.

The Equalization of Net Family Property

Ontario follows an equalization regime when married spouses divorce. Rather than dividing each asset directly, the law compares each spouse’s net family property (NFP), the increase in their net worth during the marriage. The spouse with the higher NFP typically pays an equalization payment to the other.

Certain assets, however, are excluded from this calculation, and inheritance is one of the most important exclusions.

Inheritance as Excluded Property

Under the Family Law Act, property received by one spouse as an inheritance during the marriage is generally excluded from that spouse’s net family property. This means the value of the inheritance is not shared with the other spouse upon divorce.

This exclusion applies whether the inheritance was received in cash, investments, or other assets, as long as it can be clearly identified and traced back to the original inheritance.

The Importance of Tracing and Separation

The key to maintaining the excluded status of an inheritance is keeping it separate. If the inherited funds are deposited into a joint account, used to pay down joint debts, or mixed with family assets, it may become difficult or impossible to trace. Once commingled, the inheritance may lose its excluded status and be included in the equalization calculation.

The Matrimonial Home Exception

One of the most significant exceptions to the inheritance exclusion involves the matrimonial home. If an inheritance is used to purchase, improve, or pay down a matrimonial home, it loses its excluded status entirely.

Even if only one spouse inherited the funds and even if the home is in that spouse’s name alone, the value of the matrimonial home is always shared under Ontario law. This rule often comes as a surprise and can have major financial consequences.

Gifts and Inheritances Received After Separation

Inheritance received after the date of separation is not included in net family property and is generally not subject to equalization. However, timing disputes can arise if separation dates are unclear or contested, making legal advice critical.

Protecting an Inheritance

There are proactive steps individuals can take to protect an inheritance. Marriage contracts or cohabitation agreements can specify how inheritances will be treated in the event of separation. Proper financial planning, careful record-keeping, and legal guidance can significantly reduce risk.

Seeking Legal Support

Inheritance is not automatically shared in a divorce, but it is not automatically protected either. How it is treated under Ontario family law depends on how the inheritance is managed, documented, and used during the marriage. At Majoka Law, we help clients understand their rights and develop strategies to protect their financial future during separation and divorce.