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When you are married, receiving a gift or inheritance is complicated; as uncomfortable as it will be, I urge you to speak with a family lawyer, prior to making investment or spending decisions.
In Ontario, the Family Law Act states that if the gift or inheritance is received from a third party after you marry, it is excluded property. This means that if you separate, when we calculate each person’s “net family property”, the gift or inheritance will be “excluded”. Of course, there are exceptions! Similarly, if you use the gift or inheritance to purchase an asset, and you can trace the funds into the asset, the asset may also be excluded. But again, there are exceptions! Obtaining legal advice in these situations is critical.
Our Family Law Act treats the “matrimonial home” differently from other assets. If, for example, your parents give you the gift of a home while you are married, for you and your family to live in, the home does not fall into the definition of excluded property. Similarly, if you use funds given to you or inherited by you to pay off your mortgage, renovate the home or replace the roof, the funds will not be excluded property as they are being traced into the matrimonial home. Some people choose to use their inheritance on the family – perhaps a family trip or simply paying off bills – recognize that if it’s spent on “living” as opposed to purchasing an asset, it no longer exists and you will not receive credit for it on a separation. A safe choice is to put the funds into a separate account or investment, in your own name. And definitely keep records to prove that gift or inheritance was deposited into the account/investment. The difficulty, of course, is explaining your choice to your spouse. You won’t be surprised to hear that I recommend the two of you attend mediation to have these difficult conversations. There are other alternatives, such as having a marriage contract, to provide how the gift will be treated, in the event the two of you were to separate. And most importantly, get informed, so you will know the consequences of the financial decisions you make.