When you’re married, and getting a divorce in Nova Scotia, most if not all the property you and your spouse brought into and accumulated during the marriage is divisible between the two of you. Our Matrimonial Property Act calls this “matrimonial assets”; it includes the “matrimonial home and all other real or personal property acquired before and during the marriage”. There are few exceptions to this rule, two of which include gifts and inheritances, “except to the extent to which they are used for the benefit of both spouses or their children”.
What does the “extent to which they are used” mean, you may ask. Well, let’s apply this to a defined situation, like a cottage. Let’s envision a situation where one spouse has inherited a cottage from her parents. Upon separation, what happens to that cottage? Does the other spouse have claim to its value? The answer is usually yes, but let’s not get ahead of ourselves.
Assuming there are no prior written agreements between the spouses, factors including but not limited to the following will be considered:
- Length of the marriage;
- Who went to/stayed at the cottage and for how long; and
- Contribution of family money or money’s worth to maintain or enhance the property.
The court will be looking to the extent to which the asset has gone into “the matrimonial pot”. Was the asset integrated into the life of the family or was it treated separately? Trifling or insignificant use will not bring the cottage into the pot for division.
“But we’ve barely used the cottage.”, you may say. Well, if you’re the spouse looking to have the cottage excluded from division, I apologize in advance, but the threshold actually seems to be quite low. A handful of overnight stays by the spouses and/or children will often be enough to bring the cottage into the pot. Investing financial resources into renovations is also a sure way to result in inclusion of the cottage in division.
So, what next? Like all matrimonial property, it must be valued. Let’s say the value is $100,000 free and clear from the bank after disposition costs (i.e. cost to sell). Here is where the “extent of use” will come in. The court will look to the above factors and determine what percentage of the value of the cottage should be included in the pot for division. If you are over the threshold of trifling or insignificant use, then the minimum starting point is likely around 10%. This could increase depending whether family money was invested into renovations. If you invested $25,000, previous case law would suggest that an additional 25% would be added to the original 10%, resulting in 35% of the value ($35,000) to be divided between the spouses. Also, if your spouse invested his time and labour into the cottage, like clearing brush and trees, or renovations, then this will be considered as well.
At MDW Law, we can advise you as to your options to protect your inherited assets from division or if you are in the process of separation, we can advise you as to the extent to which your inheritance should be included in division, if at all.