With the ongoing increase in the cost of Real Estate, in Toronto and throughout the Province of Ontario, purchasing a matrimonial home is proving to be a difficult challenge for many married couples. Often, couples rely on help from parents to get them started in the property market, or to take the leap from their first small apartment, to purchasing a family home.
So how does one protect from a later breakdown in the marriage, a gift or inheritance received and paid towards the purchase of a matrimonial home?
A gift or inheritance received from a third person during the course of the marriage is ordinarily protected, as it is excluded property and is not included in the spouse’s net family property for the purpose of equalizing and sharing in the event of a breakdown in the marriage. However, the Family Law Act treats the matrimonial home differently from all other property. Its value will always be shared between the spouses, unless a valid domestic contract stipulates otherwise. Without a Marriage Contract, if you use inherited money, or a gift from parents or anyone else, as a down payment on your home, or to pay down your mortgage or a home line of credit, or even on renovations for the home, you will no longer be able to exclude those funds.
Fortunately, it is possible to protect any such gift or inheritance paid into the matrimonial home. The Family Law Act allows two persons who are married to each other or intend to marry, to enter into an agreement in which they agree on their respective rights and obligations under the marriage or on separation, annulment, dissolution of the marriage, or on death. It is possible to include such terms in the marriage contract that gifted or inherited funds paid into the matrimonial home, either to assist towards the purchase, or to pay down the associated debt, are to be excluded in much the same way as any other gift or inheritance would be excluded.
So, married couples can accept the funds their parents worked so hard to save, in order to get onto the property ladder without the concern that these funds would have to be shared with a spouse upon the breakdown of the marriage. But never put gifted or inherited money toward the matrimonial home, or move into an inherited or gifted home with a spouse, without first ensuring that the appropriate protection is in place by way of a properly drafted Marriage Contract.