When a relationship ends one issue that frequently needs to be addressed is how gifts and inheritances are dealt with. Section 85(1) of the Family Law Act makes the situation a lot simpler.
This provision for gifts and inheritances (aside from capital gains) to be excluded from the family property which is divided when a relationship ends. The recent case of Cabezas v Maxim, 2014 BCSC 767 , however, suggests that third parties who make gifts, loans, or advances on inheritances during the relationship need to document their intent if they wish for the monies to remain with only one party. This is particularly important when a couple undergoes a separation and/or divorce.
In the event that there is not a clear documentation trail demonstrating for whom the monies were intended, the partner trying to exclude the property from family property will likely experience problems demonstrating that the monies were for his/her sole benefit and the court may find that the gift qualifies as a shared asset. Those intending to benefit only one partner in a couple with a gift or inheritance should clearly document that intend to protect the recipient.
Frequently, gifts or inheritances are used to purchase property such as a family home, to pay off family debts, or placed in a joint account or investment. Cabezas v Maxim further suggests that these transactions should also be documented in such a way as to establish that the monies are the exclusive property of one partner so as to exclude them from the division of joint assets.
Ultimately, is important not to rely solely on the wording of the legislation; the devil is in the details and documentation is the most viable solution.
The simple approach would be to discuss with your partner how inheritance will be handled before you receive it. If it is a large inheritance, we recommend that you write out your agreement and sign it for future reference.
Co-habitation agreements are also a great way to address anticipated gifts and early inheritances.
Catharine Schlenker
Student at Law
University of Victoria