Maclaren Corlett (Lawyers Est. 1873)

Although family law, which is the law that governs the regulation of property, support and custody and access rights between married and non-married couples and parents of not yet independent children, is generally well known to most lawyers, it has been my experience that it holds surprises for just about everybody else. With this series of blog posts, I would like to share with you some of the most common aspects of family law that come as a surprise to many people.

The first is the exemption from property division on separation of gifts or inheritances from persons other than your spouse, usually from a parent it seems, and the loss of that exemption if the gift or inheritance is invested in any form in the matrimonial home. As a rule a gift or inheritance after marriage is excluded from the division of property, an equalization process on separation – something that I will explain in a later posting – and may be kept by the spouse who received it, free from any claims against it on the part of the other spouse. It does, generally, still have to be intact and separately identifiable or traceable as such if it has changed forms over the years – first received in cash, then used to buy a boat, then the boat was sold to buy paintings, etc. – the cash gift or inheritance in this case is “traceable” to the paintings.

The surprise for so many is that if the gift or inheritance is invested into the matrimonial home the gift or inheritance loses its exemption. Thus if it is used as part of the purchase price of a matrimonial home or, as I experience most often, is used to pay down the mortgage, the gift or inheritance loses its exemption and may not be separated out from the division of assets, the equalization process, if the spouses should separate at a later date. It is important that spouses be aware of this in order to avoid surprise at a later date. A spouse may still choose to do this, invest the gift or inheritance in a matrimonial home, but it is important that if he or she does do it, it is done with his or her eyes wide open and with knowledge of the consequences – no surprises later.

A simple and easy way to avoid the consequence of losing the exemption is to enter into a Marriage Contract with your spouse that specifically retains the exemption and ensures that in the event of separation the gift or inheritance will be returned to the spouse who it was given or bequeathed to free of any claim on the part of the other spouse.