Is my spouse entitled to the value of property that I inherited in the event that we obtain a divorce?
According to the Family Law Act, property (other than a matrimonial home) that is acquired, either as a gift or in the form of inheritance from a third party, even if it was received after the date of marriage, is property that will be excluded from the equalization process. This property must be in existence on the date of separation. In addition, in order for the entirety of the inherited funds to qualify as an exclusion, it must have been kept separate and not co-mingled in a joint account.
Therefore, technically, the property that you acquired through inheritance is your property. Accordingly, your spouse is not and will not be entitled to the value of your inheritance. However, there is an exception to this general principle. In the event that the property you have inherited, or the gift that you have obtained, increases in value throughout your marriage, then your spouse may be entitled to half of the increase in value since the time of the marriage.
In the event that you want to protect any gifts or inheritance from a third party, either before or following the time of marriage, and you do not wish to have the increased value vulnerable to equalization, you may retain a lawyer to draft a marriage contract. A marriage contract can be pre-nuptial or signed before the wedding. Alternatively, it may be post-nuptial and signed after marriage. In this marriage contract, you are able to outline parameters that state that the property inherited is not to be subject to equalization under any circumstances. Furthermore, should you wish, you can instruct your lawyer to draft a contract stating that any increase in value in the property shall not be shareable property and shall not be subject to a division of net family property, should there be a breakdown in the marriage. In the event that you do that, you will not be required to share the increase in value with your former spouse.
For more information on equalization and exclusions, get in touch with Krol & Krol at 905.707.3370.
