inheritance issues

[momof 3C's]

I understand inheritance money is except provided it is kept separate and out of the matrimonial home. My question is there are assets purchased in part with inheritance funds the remaining funds used were a loan and the assets were used by the family and expenses were paid with joint funds. Example insurance and feed and vetting. Thanks for your input.

[Kenny]

In Ontario, the Family Law Act states:

"Excluded property

(2) The value of the following property that a spouse owns on the valuation date does not form part of the spouse’s net family property:

1. Property, other than a matrimonial home, that was acquired by gift or inheritance from a third person after the date of the marriage.

2. Income from property referred to in paragraph 1, if the donor or testator has expressly stated that it is to be excluded from the spouse’s net family property."


There is also a comment from this Ontario site's FAQ section:

Q. I've heard people talk about "excluded property". I don't understand what that means.

A. Certain items received during your marriage, such as life insurance proceeds, gifts from third parties, inheritances and damages arising from personal injury awards, may be excluded from the calculation of your net family property. In order for you to be able to exclude these items from the calculation you must have kept these items separate from all other family property, and you must be able to prove how these monies have been used. For example if you received a $50,000 inheritance and then invested it in a GIC, the value of the GIC would not be included in the calculation of your net family property, but you would have to show how the inheritance was transferred and invested.

There is one important exception to this rule, and that is any money that you might invest in the matrimonial home. The value of your matrimonial home must be included in the calculation of your net family property, even if you used money from an inheritance, life insurance proceeds, or damages arising from a personal injury award to pay towards the home.

My father died just before my divorce, but, as my mother was still alive, there was no inheritance yet. My mother died two years after my divorce. Please note, this is absolutely true, but disgusting. My mother had not even been put in the ground yet (the day of her wake actually) my ex-spouse filed for my father's portion of the inheritance that was Willed to my mother. It was a very complicated claim and was only for a few thousand dollars, but my lawyer at the time suggested a "payout" to my ex-spouse rather than a $20 - $30K legal bill to defend it.

Mom of 3C's, this is not really an opinion, but what I found in regulation and on the Internet. I am sure many others here have lots of knowledge on this matter.

Good luck!

[ddol1]

I have the same delemma of sorts with the inheritance which this is from my lawyer today and at the beginning of all this which would have been april last year.

Right off the bat you term your inheritance as exempt. Not true it becomes an equalizer to your net family property which just prior to the equalization to both your net family properties the amount of eligable inheritance funds are deducted from your total thus reducing your total value of possessions aquired during the period of your marriage.

I admit what has been written could be phrased better but maybe someone could improve on it.

1. physical items you inherited regardless of what it is remains 100% excluded. This is assuming you still have it or them on the date of valuation. You must assign a fair garage sale value to them on the date you received them. The total is deducted from your total net family property
2. cash a bit harder in that you must keep them seperate with seperate intent for the investment so if you use it for a common interest like a family car then it would not be excluded anymore as you have joined your gift with the family or your ex. Say you bought some fancy car that you used for only personal pleasure, no one else drove this car and you would be then able to exclude the funds used to purchase the car.
3. your bought your dream home theater setup and thiis was for you to use only then it would be excluded - but say this fancy home theater was started up on a daily basis and used by the whole family but it was ALWAYS refered to "AS YOUR HOME THEATER" you have entered the grey area of the exclusion and niw you would be faced with proving the probability that this was true and based on this probability was it 51% or was it 97% true to be your personal home theater - you get to keep it and have its value excluded from your net family property .

there are assets purchased in part with inheritance funds the remaining funds used were a loan and the assets were used by the family and expenses were paid with joint funds. Example insurance and feed and vetting

All what you describe here is common benefit to the entire family even to the extend of paying day to day expenses and bills - this is probably no longer excludable.

However my lawyer did confirm what he told me in April that the once hard line of seperate and joint is no longer as strongly inforced as it once was. He said the premise is evolving within the court that this does not reflect todays world and the common family that is found today. In other words many families live a fully joint approach to supporting and raising a family so no longer is one's right to the inheritance automatically lost because it was deposited into a joint account (in the past that would have been enough to stop the elligability right there.

So he said, it is more important for you to be able to trace the funds from the date of receipt and what your intent for the funds was - and did you in fact do this (say keep the money for retirement. I admit that properties like a house that you kept and rented out or on a bigger scale some form of commercial property and last would be a clear documentation that the inheritance was to benefit that person only and never shared with the spouse would changes things up yet again. Point is be articulate, keep receipts and documentation close by.