How to Protect Your Children’s Inheritance in a Divorce: Part 1

Divorce can pose challenges to protecting your children’s inheritance when it comes to the division of assets during a divorce. By understanding Ontario’s legal framework and taking proactive measures, you can ensure that your children will receive the inheritance you intend to provide for them. In this post, the first of a two-part series, we look at an important element of that framework, the tracing provision in the Family Law Act of Ontario.

The Family Law Act

The Family Law Act of Ontario regulates the rights of spouses and dependents regarding property, support, inheritance, and other matters of family law. It’s designed to help ensure an orderly and equitable settlement of the affairs in the event of spousal separation and divorce.

If you’re the beneficiary of an inheritance while married

Basically, the Family Law Act includes a tracing provision. If you receive an inheritance while you are married, and your marriage falls apart, there’s a special paragraph that allows for the tracing of the money in your estate to your account. If you kept that inherited money in the bank, and never touched it, it’s always yours. If you leave it to your kids in your will, and your kids have kids, it gets passed down through your bloodline. It’s always protected. You will never have to share it with your spouse. BUT…

Ontario only

The Family Law Act of Ontario is only for Ontario residents. If you get married in Ontario, then later move outside Ontario, then separate or divorce, the law may not protect you from sharing your inheritance from your spouse if you separated. You must be a resident of Ontario.

Everyday expenses

If you spent some of your inherited money to pay for groceries, hydro, gas, your home mortgage, the normal expenses we all have, then your marriage falls apart and you divorce, that money you spent is gone. You cannot get it back. It’s what’s left in your bank account when you divorce that is protected.

Real estate outside the matrimonial home

If you used part of your inheritance to buy a condo or other real estate property in Ontario, and rented it out, and then your marriage falls apart, the money is yours.  But if you own real estate anywhere else in Canada, say in British Columbia, there’s no guarantee. What about overseas? If you inherited a property in Italy, for example, and then you separated, that Italian property would in theory be excluded from sharing it with your spouse. But it could also be subject to the laws of Italy. You could be in a situation where there are two different laws in conflict. Which law applies? That’s a whole different topic.

More to come

This is Part 1 of a two-part series that deals with protecting your children’s inheritance in a divorce. In our next post, Part 2, we look at preventing an in-law from coming after part of your estate by claiming to be a dependent.

Contact us for help

At HNPC, our Family Law Services Team can provide you with personalized advice and support tailored to the specific circumstances of your divorce or separation. By being proactive and seeking the right guidance, you can protect your children’s inheritance and provide them with a solid foundation for their future.