Do you have questions about inheritance and divorce? Losing a family member is never easy to deal with. Sometimes there is a silver lining in that you may receive some sort of inheritance.

This happens as a gift from your loved one who has passed on. The last thing you want to deal with is then having to fight with your ex as to whether or not you get to keep the last gift you received from a close friend or relative.

There are strategies and clauses that you can incorporate into your family law file and separation agreements with the help of your lawyer to ensure that your inheritance remains yours and yours alone.

Inheritance and Divorce

In order to keep your inheritance solely for yourself, there are some steps that you should take to try to safeguard it. First and foremost, you can investigate the terms of the person’s will who is giving you the inheritance.

In order to remain enforceable you should always keep your inherited funds separate and apart from any joint bank accounts. You should also keep it away from family accounts.

This is where both parties have access to the money. The money should also not be used to pay off any joint debts. Also, avoid joint bills that are considered part of the family assets or debts.

If your inheritance intermingles with any of the family debts or assets it is highly likely that at least a portion of the inheritance will be considered divisible as family property.

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Inheritance and divorce

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Can a divorced spouse inherit?

Reach out to lawyers to talk about inheritance and divorce.

If you inherit real property such as a vehicle, home, or cabin, make sure to only register the property in your sole name. You don’t want to register in the name of your spouse.

Do you and your spouse both use the property on a regular basis? Then the property could very well be deemed to be part of the family property you will need to divide in the case of a divorce.

The best way to ensure that your inheritance remains solely yours is to have a written agreement. This would be drawn up by your lawyer.

It would outline how such inherited funds or items are to be utilized within your relationship in the future. This would protect your assets from having to be divided during a divorce.

Are inherited assets protected from divorce?

During your marriage, you were able to obtain new furniture, vehicles maybe even a cottage.

When divorce proceedings are started it can be difficult to fairly divide the family assets between you and your spouse, even more so if one of you wants more than just their half share.

It is important to remember that not everything you own is divisible through a divorce and you should review all of your property holdings with a ClearWay Law lawyer before agreeing on any sort of property division.

Understanding Inheritance and Divorce: The Basics

The family home is treated with special circumstances in family law proceedings. Items obtained prior to the wedding date are unique.

The court recognizes that whether it is an investment, items, or property holding if you were the owner of it before the date of marriage then it is exempt from dividing between yourself and your former spouse.

There are specific circumstances to be aware of when dealing with such items.

Investments

The total value of the investment at the date of marriage shall be recognized as an exemption from the joint family property.

If the investment was continued during the marriage and has increased, the amount of the increase that occurred between the wedding date and your date of separation is technically up for division between spouses.

Items

Things such as vehicles, collections, or clothing will remain your property. This is unless it has been combined or used for the benefit of the family as a whole.

Did you have a new truck at the start of your marriage but used it as the family vehicle? Did you then sell it to purchase a new vehicle that has both your and your spouse’s names on it?

That vehicle might be considered joint family property.

Landholdings

Similar to investments, your landholdings and their value as of the date of marriage can be exempt from division. Your spouse may claim that they are entitled to a portion of the increase in the value of the land.

This might be counted while you owned it during the marriage. Make sure to show that you alone were responsible. You need to show you did not use joint family funds to upkeep the property.

You will try to show you were the sole owner and operator of the land in question. This is important if you want to keep the full value of the land from being divided.

What Are The Assets?

Is the land in a cabin or vacation home? Did you and your spouse frequently reside in it on a seasonal basis? Then it may be considered a secondary family home.

If this can be proven in the Ontario family court, the full value of the property may be divisible between the two of you.

When faced with property issues you should always discuss them in-depth with a family lawyer. You need to know all of your options and strategies for dealing with such issues.

You can also reach out to us to discuss inheritance and divorce.

Inheritance during marriage: basic overview

Most commonly, inheritances should not be included or subject to any distribution. Inheritances will not normally be acknowledged as marital property.

In line with that, inheritances are therefore seen as separate property. It belongs to a person who got or received the inheritance. And so it won’t normally be allowed to be divided between the two parties during a divorce.

If the inheritance is shared between the two, an inheritance can be looked at differently. This is based on the rules that differ greatly among provinces. Was the inheritance deposited into a couple’s joint bank account?

Legal Differences: Separate vs. Marital Property

Was it used for any joint marital expenses (also called commingling of inheritance)? Then the inheritance can lose its label as separate property.

Another thing, if the inheritance in question is also used to make improvements on the main residence of the couple, there’s a possibility that it will also lose its separate property status.

So, if you don’t want your inheritance to end up being split up between you and your former spouse, then refrain from doing anything that would entail it to be labelled as commingled.

Always take things like this into consideration before deciding.

Can your spouse get your inheritance in a divorce?

As per the Family Law Act, any increase in the inheritance value is counted as family property even if the inheritance is an excluded property.

For instance, you have an inherited property that is worth $600,000 and at your mediation or trial period, your inherited property is worth $800,000.

The $200,000 difference is now considered as a family property that is to be evenly divided.

Inheritance acquired before the marriage

There are certain scenarios that arise if a spouse would enter a marriage with some money or wealth that they attained. This can either happen through inheritance or otherwise.

We have laws considering how an inheritance acquired before marriage would be looked at in the event of a divorce.

If the funds that were inherited were deposited into a joint account or if the marital funds were somehow deposited into the inheritance account, then we can be sure that commingling has already occurred.

Protecting Your Inheritance: Pre- and Post-nuptial Agreements

If no commingling was done, then the inheritance would be otherwise considered separate property, and the person who’s meant to receive it will get the whole thing, even if the divorce is finalized.

Just to be on the safe side, to make sure your inheritance is well protected, do a prenuptial agreement.

This is so that all pre-marital assets can be well defined as to who has ownership of those and how a couple would approach any future inheritances.

Can you lose inheritance in a divorce?

The rule of thumb is that any funds or assets that were commingled convert everything into marital property.

Some courts might only hold a portion or even none of the commingled funds may be allowed to be considered as separate property.

This is true if the party in question can prove or effectively demonstrate that the funds were never intended to be shared, to begin with.

Common Scenarios: How Courts Usually Handle Inherited Assets

But this is a bit tedious and it involves a very high burden of contesting proof that will contest the presumption of the involved shared funds.

Take note, always keep all of your detailed records and notations about any inheritances you have received.

This is important in the event that your spouse may try to stake a claim of an ownership interest in those properties or assets if a divorce would occur.

A person who’s looking to argue or contest the sharing of any or all inheritances involved will probably need the advice of an experienced family lawyer.

Can My Ex-Wife Claim My Inheritance After Divorce?

Another situation to be considered is called Transmutation. Whatever inherited property can be considered a joint property if you assigned ownership of that property to your partner.

Let’s say you inherited a house from your parents when they passed away. You decided to put your spouse’s name on the deed of that inherited house.

Now your spouse will be entitled and will have an ownership interest in that property. If the divorce is finalized, it can be considered a joint property instead of a separate property.

The Role of Duration: How Long You’ve Been Married Matters

So all things considered, at the start of any relationship, spouses will have no problems sharing inheritances with their other half, only to regret doing it once the relationship goes south and divorce is needed.

Obtaining concrete proof is critical to getting sole custody of any inheritance. Are you about to receive an inheritance and you’re still married? You might want to know all the options that you have at your disposal.

You will also want to be sure it won’t be considered marital property. It would be wise to get an attorney who knows how to handle this type of situation.

Inheritance Divorce Ontario

If it’s money that you’re inheriting, you might want to consider opening up a bank account under your own name only.

You would then deposit the funds with the sole goal of leaving it untouched until you can consult with an attorney. You would then go and get legal advice.

By doing so, you will be informed of the best course of action to take and what your rights are. You can then decide and act appropriately.

The lawyers will make sure you will be provided with professional insights. You will get all the right assessments and recommendations on what course of action to take.

Author: Alistair Vigier is the CEO of ClearWay Law