Must You Share A Money Gift With Your Ex?

Your boss gives you a large financial gift. Can your spouse get their hands on it? Normally, no, but you could lose it or a chunk of it.

Our family law has rules for how your property (and debts) are to be divided if you and your spouse split up. For starters, family property (and debts) are to be shared equally – unless the court decides a split down the middle would be significantly unfair.

But some things, like property you each owned before your relationship, and personal inheritances or gifts you get before you separate, don’t count as family property – they’re “excluded property,” which generally isn’t shared (though value increases during the relationship are).

Money or other assets “derived from” excluded property (say, money you get from selling your gift or inheritance) also typically don’t count as family property.

But how you deal with a gift or inheritance that was initially yours alone may (or may not) turn it into family property.

In one recent court case, Henry and Trudy (names changed) started living together in 2003, got married in 2004 and separated nine years later. They lived in Richmond and had three children together.

Henry had been with his employer company since 1997. About two years before he and Trudy separated, he got a large $2 million sum as an inheritance gift from the company’s principal when that wealthy businessman passed away.

Henry was a director of more than 30 companies related to his employer company.

Concerned about his risk as a company director should things go south with any of these companies, he put their Richmond family home in Trudy’s name alone for creditor protection. He agreed in court that this home was family property.

Trudy wanted to move from Richmond to Vancouver. So late 2011 (while still together), the couple used the bulk of Henry’s $2 million inheritance to buy land in Vancouver for a future home. Henry also put that land in Trudy’s name alone, and they started building.

When the couple separated in early 2013, only the new foundation had been constructed. To avoid a $500,000 loss, they completed construction although they were separated. They then sold the Vancouver house essentially at cost, avoiding a loss.

Henry argued the $2 million he’d been gifted, mostly used for the new Vancouver property (and the $2 million from its sale) were excluded property, so shouldn’t be split. But the court decided that when he put the land in Trudy’s name, making it her property for creditor protection, that was a gift to her. It turned the land into family property, so the sale money had to be shared.

Several recent cases have come to different conclusions about what happens after a separation to “excluded property” (or its sale proceeds) transferred between spouses.

This is a tricky area, so see a good family lawyer about who gets what after you and your ex separate.

 

This column has been written by Janice Mucalov LL.B as part of “You And The Law”. It provides information only and must not be relied on for legal advice. Names of the parties in reported cases have been changed or removed to protect their identity. Lawyer Janice Mucalov is an award-winning legal writer

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