Excluded Property in a Northwest Territories Divorce

Not everything you own goes into the equalization pot. The NWT Family Law Act carves out specific categories of assets from the Net Family Property calculation — but only if you can prove they qualify.

What Qualifies as Excluded Property

Under the Family Law Act, these assets are excluded from equalization:

Pre-marriage assets. The net value of property you owned on the date of marriage (or the start of cohabitation for common-law partners) is deducted from your NFP. If you came into the marriage with $50,000 in savings and $10,000 in debt, your deduction is $40,000.

Inheritances from third parties. Money or property inherited from someone other than your spouse during the marriage stays excluded — as long as you kept it separate.

Gifts from third parties. A cash gift from your parents, a piece of land from a relative — these are excluded if received during the marriage and not commingled with joint assets.

Personal injury damages. Compensation for pain, suffering, loss of guidance, or mental distress is excluded. But the portion of a settlement meant to replace lost income or cover family expenses is family property.

Life insurance proceeds. Insurance payouts received during the relationship are generally excluded.

One critical exception: gifts between spouses are not excluded. The ring, the car, the surprise renovation — those are family property.

The Tracing Problem

Here is where most people lose their exclusion. The law says the asset is excluded. The practical reality is that if you cannot trace it, the court treats it as family property.

Consider an inheritance of $80,000 deposited into a joint savings account. Over the next five years, both spouses contribute to and withdraw from that account. By the separation date, the original inheritance is untraceable — mixed with marital funds, partially spent, partially reinvested. The exclusion is gone.

To preserve an exclusion:

• Keep inherited and gifted money in a separate account in your name only
• Never deposit excluded funds into a joint account or use them for joint expenses
• Maintain a paper trail — the original transfer documentation, bank statements showing the deposit, and ongoing statements showing the balance remained separate
• Document the source with a letter from the estate trustee, gift letter from the donor, or insurance claim documentation

Pre-Marriage Home: The Exception to the Exception

Normally, pre-marriage asset values are deducted from your NFP. But the matrimonial home breaks this rule. If you owned the family home before the marriage and it remained the family residence on the separation date, you cannot deduct its pre-marriage value.

If you owned a different property before the marriage and sold it during the relationship, the proceeds can be traced as excluded property — but only if they were kept separate and not rolled into the family home.

What Happens When Excluded Property Grows

The original value of excluded property is deducted, but any growth during the marriage may be treated differently depending on how it was managed. Interest earned on an excluded RRSP that was kept completely separate is generally excluded along with the principal. But if excluded funds were actively managed alongside marital investments, the growth may be swept into family property.

The safest approach is complete separation from the start.

The Northwest Territories Divorce Financial Split Guide includes an excluded property tracing worksheet that helps you document and calculate your deductions with the records you already have.

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