Receiving an inheritance can provide financial security and peace of mind, but when a marriage breaks down, many people worry about whether their inheritance will be divided during the divorce process.
The good news is that Canadian family law offers some protection, but there are also situations where inherited money can lose that protection if not handled carefully. If you are wondering how to protect your inheritance during a divorce and want to understand your rights, here’s what you need to know.
Inheritance money typically refers to any money, property, or other assets received from a deceased individual’s estate. This could include:
Inheritance can be received before or during the marriage and is usually left to only one spouse. Because of that, it may not be considered part of the “matrimonial property” that gets divided during a divorce.
Your spouse is generally not entitled to your inheritance if you kept it separate from family property. Under the Family Property Act (Alberta), certain property types such as gifts, inheritances, or awards from personal injury lawsuits—are considered “exempt property” and are not subject to equal division during divorce.
However, there are exceptions. If you mix inherited money with shared family assets, you may inadvertently turn it into matrimonial property. That’s why it’s essential to know how to protect an inheritance from the risk of divorce early on.
Here are a few key steps you can take to minimize the chance of losing your inheritance in a divorce:
One of the easiest ways to protect your inheritance is by keeping it in a bank account that’s solely in your name. Avoid depositing it into joint accounts or using it for shared expenses, as this can “commingle” the funds and make them subject to division.
If you use your inheritance to buy a family home, renovate shared property, or pay off a joint mortgage, it can become family property. For example, if you inherited $100,000 and used it as a down payment for a home you and your spouse live in together, it’s likely that the value of that investment will be shared upon divorce.
Documenting the amount you received and when you received it is critical. Save a copy of the will or letter from the estate executor, bank deposit records, and any communication showing the inheritance was intended for you alone. This makes it easier to prove the asset’s exempt status.
Some couples assume that if they’ve agreed the inheritance will remain untouched, there’s no risk. Unfortunately, verbal agreements hold little weight during legal proceedings. It’s always better to have a formal agreement or to keep the inheritance fully separate.
If you are expecting an inheritance or have already received one, a marriage contract (prenuptial or postnuptial agreement) can outline exactly how the inheritance will be treated in the event of divorce. These contracts are legally binding and provide extra protection.
According to the Alberta Family Property Act, only the value of the inheritance at the time you received it is exempt. Any increase in its value over time (for example, investment growth or appreciation in a property) may be considered marital property unless you’ve taken steps to protect it. This is why tracking the value at the time of receipt is so important.
Even with best practices, protecting an inheritance can be complex—especially if you’re facing divorce or separation. A family lawyer can help you:
At Richmond Tymchuk Family Law, we understand how important it is to protect what’s rightfully yours.
If you have questions about inheritance and divorce or need guidance on how to protect your assets, contact us today. We’re here to help you every step of the way.