Premarital Gifts and Family Trusts: What is Included in the Net Family Property?
Under the Ontario Family Law Act, gifts received before and after the date of marriage are treated differently. For gifts received by one spouse from a third party prior to the marriage (premarital gifts), the value of the gift at the time of marriage will be deducted from the net family property; conversely, gifts received by one spouse from a third party after the marriage (postmarital gifts) are wholly excluded from net family property, provided the donor's intention was to make the gift to only one spouse. However, all income derived after the marriage from a premarital gift must be included in the net family property that is subject to equalization and division. This is not the case for postmarital gifts: all income derived from such a gift is excluded from net family property.
The Ontario Court of Appeal recently grappled with this distinction in Lang-Newlands v Newlands, 2026 ONCA 530 [Newlands]. In Newlands, the court examined whether moving premaritally gifted assets into a new trust created by a third party after the marriage allowed those assets and any income they generated to be excluded from the net family property.
Background
The wife was gifted shares from a trust established by her father prior to her marriage; at the time of the marriage, the value of the shares was around $16 million. This was clearly a premarital gift, meaning any income generated by those shares must be included in the wife's net family property.
However, in 2001 an estate freeze transferred these shares to a new trust, exchanging the wife's growth shares for preferred shares with a fixed value to separate the current value of the shares from their future growth value. The wife and her four children were the equal beneficiaries to whom the growth value would accrue - each had a 20% interest in the new trust. The new trust was initially settled by the wife's father for $100.00, but the only assets involved in the trust were the shares previously gifted to the wife by her father before the marriage. The value of the growth shares held by the new trust increased by approximately $645.5 million between its establishment and the date of separation.
Appellate Ruling
The trial judge held that he was bound by Shinder v Shinder, 2018 ONCA 717 [Shinder] to find that the establishment of the new trust constituted a postmarital gift and was therefore to be wholly excluded from the wife's net family property. However, the Ontario Court of Appeal found that Shinderwas not binding, because that case involved a trust made up of both pre-and postmarital gifts. Because the father did not make a new gift of property to the wife beyond the de mini mis $100.00 he paid to establish the new trust, and because the only assets held by the new trust were the shares gifted to the wife before the marriage, the Ontario Court of Appeal held that the creation of the new trust did not constitute a postmarital gift. Only the $100.00 paid by the father to establish the new trust could be properly considered a postmarital gift.
The Ontario Court of Appeal held that the value of the shares at the date of marriage ($16 million) should be deducted from the wife's net family property, but the increase in value of the wife's 20% interest in the new trust should be included in the wife’s net family property. Exercising its discretion, the Ontario Court of Appeal declined to order a nearly $26 million equalization payment, agreeing with-the trial judge's conclusion that such an amount would be unconscionable, instead ordering reduced equalization of $18 million payable to the husband over 8 years. The Court agreed with the trial judge that the full equalization amount was unconscionable given e wife's disproportionate payment of the family debt, the husband's mismanagement of finances and forging of the wife's signature to make personal investments, and the fact that the $26 million payment would have put the husband's net worth higher than the wife's.
What This Means for You
The Ontario Court of Appeal’s decision in Newlands provides new clarity regarding what can be considered a postmarital gift that can be excluded from the net family property. An estate freeze that creates a family trust after the date of marriage will not be considered a new postmarital gift if it involves assets received by a spouse as a premarital gift, even if a third party made de minimis contributions in effecting the estate freeze.
Whether you're an Ontario resident or you've moved to Alberta from Ontario, the legislation
governing pre- and postmarital gifts is very similar- Alberta Family Property Act also provides that postmarital gifts are wholly exempted from the family property while any increase in value on a premarital gift may be included in the family property. Although Court decisions from Ontario are not strictly binding on courts in Alberta, the Ontario Court of Appeal’s decision in Newlands will likely persuasive in Alberta given the similarities in the law.
How We Can Help
At the Calgary Legal Team, we can help you understand your financial rights and duties when navigating a separation, especially when there is tax planning or trusts involved. Whether you're seeking guidance regarding how your assets will be divided, trying to protect the future value of your assets for beneficiaries, or fighting for an equitable division, we're happy to assist.
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