Estate planning: Keeping an inheritance safe from a spouse

Keep a down payment gift safe from a divorce

How to make sure an inheritance is still yours even if you divorce

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Q: I was single when my parents gifted a down payment for a home to me. What do I need to know before I enter a relationship about what the risks are to this money and how I can protect it if there is a separation or divorce.

—Leanne

A: When money is received by way of an inheritance, the person who provided the inheritance usually wants to make sure it is protected as an asset when a marriage is involved. There are several ways to do this.

The first would be, some sort of marriage or relationship agreement, stating that this money is protected from any type of relationship breakdown. This is a good idea under any circumstance, but it is essential if you wish to use it for the purposes of purchasing a matrimonial home, or any home that might eventually become a matrimonial home.  Even if you decide to move your partner into a home you have purchased prior to the relationship, you must have an agreement in writing prior to the move-in day.

The second thing to make absolutely sure of is that it is in no way commingled with what is considered to be the matrimonial home. If this money is used as a down payment for a home, and there is no prior contract to protect it, then that money is considered a family asset for the purposes of division.

The clearest way to make sure an inheritance does not end up as a family asset is to never co-mingle it with family assets.  Keep it completely separate and only use what you want to for lifestyle spending, considering it a gift to your spouse.

Debbie Hartzman, CFP, CLU, CDFA, TEP, and CEA, is a certified divorce financial analyst in Kingston, Ont.

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