Inheritance and Divorce in Canada — Is Your Inheritance Shared?

A man in London, Ontario inherits $200,000 when his mother dies. Eight years later his marriage ends, and his first fear is that the inheritance — the last thing his mother gave him — will be cut in half and handed to his ex. The reassuring general rule is that an inheritance is usually his to keep. The unsettling detail is that whether he actually keeps it can come down to which bank account he deposited it in and whether any of it went into the family home.

This guide explains how inheritances are treated when a relationship ends in the common-law provinces, why the protection is real but fragile, and the concrete steps that preserve it. It is general information, not advice on your separation; family-property law is provincial and fact-specific, so a family lawyer in your province should weigh in.

The general rule — inheritances are excluded #

Across the common-law provinces, an inheritance is generally treated as excluded property in the family-property division. The starting point is that the inheritance itself is not split on divorce; it belongs to the spouse who received it. That is the headline, and for many people it is the end of the story.

But "excluded" is a status you can lose, and the two largest provinces show two different ways it erodes.

Ontario — the matrimonial home trap #

Under Ontario's Family Law Act, a gift or inheritance received from a third party after the date of marriage is generally excluded from net family property.^[1] Two qualifications matter enormously:

• Income is included unless the person who gave the gift or inheritance expressly stated that the income should also be excluded.
• The matrimonial home overrides the exclusion. If the inheritance is used to buy or improve the matrimonial home, the exclusion is generally lost — and this is true regardless of when the inheritance was received.^[2]

That second point catches people constantly. Inheriting money and using it to pay down the mortgage on the family home, or to renovate it, can quietly convert protected, excluded money into shareable family property. The spouse claiming the exclusion also bears the burden of proving and tracing it.

British Columbia — the growth is shareable #

Under British Columbia's Family Law Act, inheritances and third-party gifts are excluded property.^[3] The distinctive BC rule is that the increase in value of excluded property during the relationship is generally family property and shareable. So if an inherited $200,000 portfolio grows to $320,000 during the marriage, the original $200,000 is generally excluded, but the $120,000 of growth can be divided. As in Ontario, the spouse claiming the exclusion has to prove and trace it.

Other provinces have their own family-property statutes with their own treatment of inheritances; the Ontario and BC approaches illustrate the range rather than the whole map.

Commingling — how the protection is actually lost #

In practice, exclusions are rarely lost to a clever legal argument; they are lost to ordinary household behaviour. Depositing an inheritance into a joint chequing account, using it for shared expenses, or putting it into the matrimonial home all blur the line between separate and family money. Once funds are mixed and can no longer be traced, the exclusion can collapse. Tracing — proving on paper that this dollar came from that inheritance — is the whole ballgame in a contested division.

How to protect an inheritance #

• Keep it separate. Hold the inheritance in an account in your own name, not a joint account.
• Keep it out of the home. Avoid using it to buy, pay down, or renovate the matrimonial home, especially in Ontario.
• Document the source. Retain the will, the estate distribution records, and a clear paper trail.
• Consider an agreement. A marriage or cohabitation agreement can confirm the inheritance stays separate — see marriage contracts and wills.
• Mind the growth, in BC especially. Where growth is shareable, segregating the inheritance also helps quantify what is and is not on the table.

The estate-planning connection #

An inheritance you keep as excluded property is also yours to leave as you choose in your own will. And if you are the one leaving an inheritance to a married child, you can help protect it — by expressing that income is excluded where your province allows, and by encouraging the recipient to keep it separate. Lifetime gifts raise parallel issues; see gifting during your lifetime in Canada.

What we focus on at It's Simple Will #

The Will Creator helps you direct your own estate, including an inheritance you have preserved as your separate property. Protecting an inheritance through a separation is a family-law exercise that calls for a family lawyer, and our guides aim to get you there already understanding the words "excluded property" and "commingling." For the wider picture, see our estate planning pillar guide.

Related guides #

• Gifting during your lifetime in Canada
• Marriage contracts and wills
• Separation agreements and wills
• Inherited property in Canada
• Estate planning in Canada — complete guide