Is my inheritance protected if we separate?
Often, yes. In Ontario, a married spouse's gift or inheritance from a third person during the marriage is usually left out of their net family property. It stays protected only if you can trace it into something you still own at separation. That something cannot be the matrimonial home.
Key points
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Excluded property is left out of the equalization calculation, so its value is not shared.
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The main exclusions are third-party gifts and inheritances, personal injury damages, life insurance proceeds, and property excluded by a marriage contract.
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A gift or inheritance put into a property that is a matrimonial home at separation loses its exclusion entirely.
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One deposited into a joint account with your spouse can lose half its exclusion.
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The spouse claiming an exclusion must prove it and trace it.
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Income earned on a gift or inheritance is excluded only if the giver said so.
What property is excluded?
The Family Law Act lists property that is left out of a spouse's net family property on the valuation date (usually the date you separated).
Gifts and inheritances. A gift or inheritance from a third person, received after the marriage, is excluded. It is not excluded if it is, or went into, the matrimonial home.
Income from a gift or inheritance. Interest, dividends or rent earned on it are excluded only if the giver expressly said so. That statement is usually in the will or a written gift document.
Personal injury damages. Damages for personal injury, nervous shock, mental distress or loss of guidance, care and companionship are excluded, including that part of a settlement. Other parts of a settlement may be treated differently.
Life insurance. Proceeds paid on someone's death are excluded, but they must still be traced if they were spent or moved.
Property bought with any of the above. It is excluded if it can be traced, unless it is the matrimonial home.
Property excluded by contract. Property that a valid marriage contract or other domestic contract excludes is left out.
Canada Pension Plan credits. These are excluded and divided separately through Service Canada.
A gift from your spouse is not on this list. It is part of your net family property. Gifts between spouses are, however, one factor a court can weigh in the rare cases where it divides property unequally. See Unequal division of net family property in Ontario.
What about a gift I received before the marriage?
It is not "excluded property," but it is usually protected another way. Each spouse deducts the net value of what they owned on the date of marriage (Townshend v. Townshend, 2012 ONCA 868, para. 12). Only the growth during the marriage is shared.
The exception, again, is the matrimonial home. A home owned at marriage gets no marriage-date deduction if it is the matrimonial home at separation. See Property division in Ontario.
Why does the matrimonial home cancel the exclusion?
The exclusions for gifts, inheritances and property bought with them expressly do not apply to a matrimonial home. The Court of Appeal has noted that the legislature chose this result for gifts used to buy a matrimonial home (Townshend, para. 32).
Say you use an inheritance to buy the family home, pay down its mortgage or clear a line of credit secured on it. That money goes into the calculation. Whose name is on title does not change this, and the test is the home's status at separation. An inherited cottage the family regularly uses can become a matrimonial home and lose its exclusion
A court can occasionally soften the result, but the bar is very high. In Ward v. Ward, 2012 ONCA 462, a wife received a $200,000 gift from her father. At her husband's urging, she used $180,000 to pay down the line of credit on the home, shortly before he left. By a 2–1 majority, the Court of Appeal upheld an unequal division that gave her an extra $90,000, half of what she put toward the line of credit. That outcome is the exception, not the rule.
What if the money went into a joint account?
Putting a gift or inheritance into a joint account with your spouse does not wipe out the whole exclusion. In Townshend, the Court of Appeal held that only half is lost, because the law presumes the deposit made your spouse a half-owner (paras. 20 and 28–33). That presumption can be rebutted with evidence that you meant something else.
Mixing money also makes tracing harder. An account in your name alone, holding only the gift or inheritance, is the simplest way to keep it identifiable.
How do I prove an exclusion?
The spouse claiming an exclusion has to prove it. In practice, you need to show three things:
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Where it came from: someone other than your spouse.
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When you received it: after the date of marriage.
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Where it is now: the asset you held on the valuation date that it can be traced into.
Useful documents include the will or estate statement and a gift letter signed by the giver. Bank statements showing the deposit and each transfer, and purchase records, matter just as much. Courts can draw sensible inferences from the records rather than demanding perfect tracing (Townshend, para. 35). If the money was spent and cannot be followed, however, the exclusion is lost.
In a court case, excluded property is listed and supported in your sworn financial statement.
Gift or loan?
Help from parents with a down payment is a common dispute. Your spouse may say it was a gift to you both; you may say it was a gift to you alone, or a loan. Write down which it is, and to whom, when the money changes hands.
Does growth in value count?
Traced excluded property counts at its value on the valuation date, so a rise in its value, such as shares or a cottage going up, is excluded too. Income it produces, such as interest, dividends or rent, is excluded only if the giver expressly said so. In an investment account, much of the growth is usually reinvested interest and dividends, so part of it may not be excluded.
Can I protect a gift or inheritance in advance?
Yes. These steps should help:
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Keep it separate, in an account in your name alone, and out of the matrimonial home.
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Ask the giver to say in writing that income from it is also excluded.
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Sign a marriage contract. It can exclude property from net family property, including value tied up in the home. It cannot limit your spouse's rights to the matrimonial home under Part II of the Act, such as the right to live there or to refuse consent to a sale.
Each spouse should get independent legal advice before signing. A domestic contract must also meet formal requirements to be valid; see Separation agreements in Ontario.
Talk to a family lawyer about excluded property
If you want to discuss how to protect your inheritance or gift in marriage, book a free 15-minute call. The call covers the process, fees and next steps; it is not legal advice on your situation. Consultation work is billed at $275 an hour plus HST or under a limited-scope retainer, with a written estimate first. We meet clients by phone or video, or in person at our North York office.
Book a free 15-minute call about excluded property · Call 416-858-1320
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Last reviewed: November 2, 2026
This page is general information about Ontario and federal law, not legal advice. Reading it or contacting us does not create a lawyer-client relationship. Laws and court fees change; check the date above.