When a family home or cottage is been in a family for generations, the spouse who is inheriting the property may be worried that the property will be lost to a spouse in divorce. If the spouses used that traditional family home together as a matrimonial home, a court can order that the “non-inheriting spouse” can stay in that home until the parties divorce, which may take several years. The court cannot order that the “non-inheriting spouse” gets legal title to the property. However, the family property regime in Ontario can force a spouse who has had a home in the family for generations to transfer it to the other spouse out of financial necessity.
The difficulty surrounding traditional family homes is mostly caused by the requirements in Ontario’s Family Law Act that any matrimonial home be included at full value in a spouse’s net family property. A matrimonial home can be any home that the spouses used or occupied together during the marriage. There can be more than one matrimonial home. Both a home and a cottage can be a matrimonial home at the same time. If one spouse inherits the traditional family home prior to separation, the value of that property on the date of separation is shared between the spouses. If the other spouse has significant assets, the value of which must also be shared, then this may not have much impact on the traditional family home. However, if the “non-inheriting spouse” does not have many assets, then the equalization of the party’s net family properties can require in the inheriting spouse making a very large payment to the other spouse. That payment may be half the value of the inherited property. Inheriting spouses may have no option but to either sell the traditional family home or transfer it to the other spouse to satisfy this obligation.
The breakdown of a marriage after only a short time can result in circumstances that are quite unfair. If a spouse inherits the traditional family home prior to the marriage, the whole value of that property may be shared on marriage breakdown. A spouse does not get credit for bringing a property into the marriage if that property was a matrimonial home on separation. Even after a very short marriage, the entire value of that matrimonial home must be shared, which may result in a situation where the inheriting spouse has to either sell the property or transfer it to the other spouse.
There are two ways to prevent the above circumstances that can result in the loss of a traditional family home. The first is for the spouse not to inherit a property prior to a separation. If a spouse does not own a property, it is not included in that spouse’s net family property and so the value is not shared. The second, and perhaps more practical option, is for the parties to sign a marriage contract that excludes the traditional family home from the calculation of net family property. A marriage contract cannot require that the non-inheriting spouse leave the traditional family home on marriage breakdown or prevent a court from allowing the non-inheriting spouse to stay in the property until the divorce is finalized. However, the marriage contract can ensure that at the end of the whole process, a traditional family home can still be owned by a member of the family.