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Monday, June 24, 2013

Inherited funds and joint accounts - whose money is it anyway?

I've been asked any number of times why a lawyer won't give a simple answer to a simple question. My response is that the simpler the question, the more complicated the answer. Why is that? Because legal principles don't exist in a vacuum. Each law and rule is applied depending on the full facts of a case. So when Joe asks me, for example, whether the money Joe inherited from his parents will go to Joe's wife if they should split up, I can't answer the question simply. I have to either ask more questions of my own, or fill my answer with "if A then B" qualifications.

The Ontario courts recently dealt with a situation in which a man inherited money from his parents. The money was deposited into an account that was held jointly with his wife. Later, when the man and his wife split up, there was a dispute about who owned what in the joint account. The man claimed that the money he had inherited (which was close to the full amount of the account at the time of separation) was exempt from being divided, based on the fact that it was an inheritance. The wife claimed that she was entitled  to half of it because it was in a joint account, meaning the husband had in effect given it to her.

The court decided that the wife was entitled to half of the inherited amount. To read more about this case, click here to see an article in advocatedaily.com.

When Joe asks me whether an amount he inherits from his parents is safe from being divided if he gets divorced, I have to qualify my answer. Yes, the law in many jurisdictions says that in principle, inheritances are exempt from matrimonial property divisions, but by his own actions, Joe has made the case more complicated than that simple principle.

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