Gifts and Inheritances and Net Family Property
In Ontario, the Family Law Act excludes certain property from the net family property calculation. Net family property is the value of each spouse’s property, after deducting debts and liabilities at the time of separation, and then deducting the value of assets brought into the marriage (other than the matrimonial home).
The value of each spouse’s net family property will be calculated and then compared to determine whether an equalization payment needs to be made. Generally, a spouse should receive half of the overall net family property in addition to their excluded property.
When are gifts or inheritances excluded?
Gifts and inheritances will be excluded from a spouse’s net family property if they were received from a family member after the date of the marriage, and the gift or inheritance was given to the spouse alone, rather than to the family as a whole.
In addition, any increase in the value of a gift or inheritance is not divided between spouses. If the gift or inheritance is sold or transferred into another asset, that asset also belongs to the one spouse alone. Similarly, any proceeds of sale of the gift or inheritance are also excluded.
Gifts or inheritances received before marriage are excluded from the net family property calculation, but any increase in value will be included in the division of family property.
When are gifts or inheritances included?
In cases where gifts or inheritance have become intermingled (mixed-up) with other family assets, such as the matrimonial home or family bank accounts, then they will be included in the division of family property.
For example, if a spouse purchased property with money received as a gift, that spouse would have to show that the property was bought exclusively with gift money. This could be particularly difficult if the money was withdrawn from the family’s joint bank account. If the spouse cannot show that the property was bought exclusively with gift money, the new property will be included in the family property.
Similarly, gifts or inheritances will be included in cases where the spouses had a common intention to share the benefit of the gift or inheritance, such as through the common use of property purchased with the gift or inheritance. Interest or income derived from a gift or inheritance will be included in the family property unless a Will or marriage contract provides that it is to be excluded.