In Canada, family inheritances can be a sensitive and significant part of financial planning. Whether it’s cash, property, or investments, inheritances are often intended to stay within the family. However, if proper precautions aren’t taken, these assets can become entangled in a divorce settlement. Fortunately, there are steps you can take to ensure your inheritance remains protected.
1. How Divorce Law Treats Inheritance in Canada
In general, Canadian matrimonial property laws treat inheritances as excluded property. This means that an inheritance doesn’t automatically get divided between spouses upon divorce. However, if the inheritance has been combined with joint assets or used for shared purposes—such as paying for a home in both spouses’ names—it can lose its protection and be subject to division. Knowing how inheritance is treated by law is the first step in safeguarding it.
2. Keep Your Inheritance Separate
One of the simplest strategies is keeping your inheritance separate from marital assets. For instance, if you receive a sum of money, it’s crucial to keep it in an account that is solely in your name. Avoid using it for joint expenses or adding it to a joint account. If the inheritance is property, such as a house, don’t add your spouse’s name to the title. This clear separation can be vital in keeping the inheritance protected.
3. Prenuptial and Post-Nuptial Agreements
Marriage contracts, such as prenuptial or post-nuptial agreements, are one of the most effective ways to protect an inheritance. A prenuptial agreement is signed before marriage, while a post-nuptial agreement can be signed at any time during the marriage. These legal agreements allow both parties to define how their property, including inheritance, will be handled in case of a divorce.
At Premier Legal Group, we often recommend these contracts to clients concerned about protecting family wealth. By clearly outlining how assets are divided, they provide peace of mind and can prevent lengthy court battles.
4. Cohabitation Agreements for Common-Law Couples
In Canada, common-law relationships don’t automatically follow the same property division rules as marriages. However, property disputes still arise. A cohabitation agreement serves a similar purpose to a prenuptial agreement and can define how inheritances and other assets are treated if the relationship ends.
5. Consider Setting Up a Trust
Another effective tool for protecting an inheritance is placing it in a trust. A trust allows you to control how and when the inheritance is distributed, ensuring that it is kept separate from marital assets. By doing so, you maintain greater control and protection over family wealth.
6. Documentation and Record-Keeping
Even without a formal agreement, it’s essential to maintain clear records of your inheritance. Documenting that the assets were intended to remain separate can strengthen your position in the event of a dispute. Keep a detailed paper trail showing how the inheritance was received and managed to prevent it from being mistaken as shared property.
7. Seek Professional Legal Guidance
Inheritance protection can be complicated, particularly when navigating Canada’s family law landscape. The best way to ensure your inheritance remains safeguarded is to seek legal advice tailored to your situation. Each province in Canada has slightly different family law regulations, and what works in one jurisdiction may not apply in another.
At Premier Legal Group, we specialize in helping individuals protect their family wealth. Whether you’re considering a marriage contract, setting up a trust, or simply need advice on how to manage your assets, we’re here to help.
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Protecting an inheritance requires careful planning and the right legal tools. To ensure your assets are secure, contact Premier Legal Group. Our experienced lawyers are ready to guide you through the process and answer any questions you have.