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How Does Inheritance Get Split in Divorce?


While divorces can be emotionally and physically very stressful, it is essential to understand the legal nuances of an inheritance amidst a divorce to guarantee a fair and just allocation of assets and to effectively safeguard your rights.

The general rule in British Columbia is that family property and joint debt, that is the net family property is subject to division 50/50 between spouses unless it is significantly unfair to do so.

Under the Family Law Act, inheritance funds from third parties are generally classified as excluded from marital property, which means they are not shared in the event of a divorce. However, any increase in the value of the inheritance during the course of the marriage is family property that is subject to division.

Our knowledgeable family law lawyers can provide you with valuable insight as to how to protect your inheritance received or how your inheritance will be affected during a divorce in British Columbia. If you want to know more about how your inheritance will be affected during a divorce, or how to safeguard your inheritance before or during marriage, reach out to Onyx Law Group.

This blog will provide insight as to how your divorce can affect your inheritance funds, and how you can protect your inheritance received both before marriage and during.

What Can Cause you to Lose your Inheritance?

What Can Cause you to Lose your Inheritance?

In British Columbia, the regulations governing the division of marital property extend to both married spouses and unmarried couples cohabiting in a marriage-like relationship for at least two years (common law spouses).

Marital property is classified into two categories: family property and excluded property.

Family property encompasses all assets owned by either spouse individually or jointly at the time of separation, irrespective of ownership titles. Examples of family purchase property include purchased marital assets, jointly owned property, the matrimonial home, RRSPs, investments, bank accounts, and other joint assets.

Upon separation, family property is typically divided equally unless a mutual agreement states otherwise, or equal division would be significantly unjust.

Excluded property (or separate property) consists of assets one spouse owned before the relationship commenced, as well as gifts and inheritances received during the relationship.

It is important to note that any increase in value to the excluded property is family property that is subject to the default 50-50 division.

How your inheritance is affected in a separation or divorce proceeding can differ depending on which province or territory you live in. In British Columbia, CA, generally speaking, inheritances and gifted funds are excluded property, but that may not be the case if you do not live in BC. If you are not located in British Columbia but in another province or territory, let’s say Ontario, we suggest that you reach out to a family lawyer who practices Ontario’s Family Law Act.

Inheritance as Separate Property

Inheritance as Separate Property

The following is a non-exhaustive list of excluded property, as per section 85 of the Family Law Act:

  1. Property acquired by a spouse before the relationship between the spouses began;
  2. Inheritances to a spouse; and
  3. Gifts to a spouse from a third party.

It is important to note that section 85 of the Family Law Act also states that if the property is excluded from family property, the exclusion applies despite any transfer of legal or beneficial ownership of the property from a spouse to another spouse.

In the context of divorce, a spouse claiming that property is excluded property is responsible for demonstrating that the property is excluded property.

Sometimes, excluded property and inheritances can be treated as family property. Examples include:

  • any increase in the value of the excluded property during the relationship is considered family property and is subject to equal division;
  • when family property is located outside British Columbia and is difficult to divide, excluded property might be divided to ensure a fair outcome for both spouses; or
  • when one spouse gifts their inheritance to their partner.

Dividing Shared Assets after Divorce

Dividing Shared Assets after Divorce

In V.J.F. v. S.K.W., 2016 BCCA 186, a husband received $2 million in inheritance money from a third party that was subsequently used to purchase property put in the sole name of the wife for creditor protection. At trial, the $2 million inheritance money was found to no longer be excluded property under section 85 of the Family Law Act. The court also considered that not dividing the inheritance would be significantly unfair based on the wife’s significant contributions to the improvement and management of the property. The wife made contributions to the household that greatly assisted the husband in developing business relationships. On an appeal from the husband, the court reconfirmed that once the husband gifted the property to his wife, the exclusion was lost.

If a spouse is concerned that their excluded property could be family property, they have the option to create an agreement with their significant other that would keep the excluded property as separate property.

If you are looking at having an agreement for excluded property prepared, we welcome you to reach out to Onyx Law Group as our experienced family law lawyers can assist you in preparing this agreement.

Protecting Inheritance in Divorce

Protecting Inheritance in Divorce

As discussed in this blog post, family property and excluded property can both be subject to division under the Family Law Act. Agreements such as prenuptial (before marriage) and postnuptial (after marriage) can be prepared to protect your assets or inheritance.

If you are considering getting married and you have assets, including an inheritance, it may prove worthwhile to speak to a family law lawyer regarding preparing a prenuptial agreement to safeguard your assets. This type of marriage contract is all the more recommended if you think your assets will increase in value after your marriage because your spouse will be entitled to any increase in the value of the excluded property during the relationship.

If you are already married and are considering the status of your assets acquired prior to the marriage, or you believe you will be receiving an inheritance, you should speak with a family law lawyer to discuss preparing a postnuptial agreement that delineates how assets will be distributed should a divorce occur.

Our expert family law lawyers are experienced in preparing prenuptial and postnuptial agreements and can assist you with the organization and preparation of both. Call us today at 604-256-1462!

Even if you already possess a prenuptial or postnuptial agreement, it’s imperative to maintain a clear distinction between inherited assets and marital assets. While it’s straightforward to uphold separation with certain assets like real estate or business dealings, maintaining the division with assets such as cash and investments requires careful consideration. Establishing a separate account, solely in your name, and exclusively holding inherited money in those accounts is crucial. For example, refrain from mixing inherited funds with wages from your employer in the same account, even if the separate account is solely in your name.

A spouse claiming that property is excluded property is responsible for demonstrating that the property is excluded for it to be considered separate property. Because of this, proper documentation of an inheritance is crucial in divorce proceedings. Keeping records of the inheritance itself, who the inheritance money was received from, and who the inheritance money was intended for, and providing a bank statement of when you acquired the inheritance, can help establish the value and nature of the inherited funds. This documentation makes the assets traceable and serves as evidence to support claims regarding the division of marital property and assets and can help protect one’s inherited money during the separation or divorce process.

Role of Legal Professionals

Navigating inheritance and divorce demands careful consideration and expert guidance, making consultation with family law lawyers, well-versed in the Family Law Act, extremely important. In these complex situations, lawyers offer invaluable insights into the intricacies of asset division, ensuring that inherited assets are protected and fairly accounted for during divorce proceedings. By engaging with experienced family law lawyers, individuals can navigate the emotionally charged landscape of divorce and inheritance with clarity, confidence, and legal integrity.

No one wants to think about divorce at the beginning of a marriage, or even beforehand, but it is important to consider how your assets or an inheritance could be affected should a divorce occur. There are ways to protect your assets or inheritance such as with a prenuptial or postnuptial agreement.

Choosing Onyx Law Group as your family law lawyers ensures that you benefit from our unwavering commitment to client advocacy and exceptional legal expertise. With a track record of success in navigating complex family law matters and preparing complicated family law agreements, Onyx Law Group’s fantastic family law lawyers bring a depth of experience and a personalized approach to each case. You can confidently navigate the challenges of family law with us as a trusted ally by your side. We offer a 30-minute free consultation and we look forward to speaking with you today!

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