“How Do We Divide Our Property if We Separate?”- The Basics of Property Division Under the Family Law Act
In British Columbia, we have new family law legislation called the Family Law Act which came into force in March 2013. The Family Law Act changed the law in BC in several ways and one of the most significant ways is property division on the breakdown of a spousal relationship.
The new legislation specifies that each spouse is entitled to a one half interest in any family asset upon separation. The first question you should ask is what is a family asset? The short answer is that family assets are all assets of any type acquired during the spousal relationship regardless of use or contribution.
But that is not the whole story- one thing that the Family Law Act does differently from the Family Relations Act (which was our previous legislative scheme in BC) is that it expressly defines “excluded property” and excludes certain assets from the definition of “family asset.”
Since “excluded property” is not expressly excluded from the definition of “family asset” it is therefore excluded in the division of assets upon separation, and the spouse who does not own the excluded property is not entitled to a one half interest in said property. It is solely owned by the other spouse.
Excluded property includes:
- any property acquired by either spouse before their relationship began
gifts from a third party
- settlements or awards of damages (with some exceptions)
- money paid or payable under an insurance policy (with some exceptions)
- a spouse’s interest in property held in a discretionary trust
- any property purchased from the sale of any of the above.
The Law was changed to exclude these elements from property division upon separation in an effort to make things fairer and more simple.
Sounds straightforward right? Wrong.
The spouse claiming that certain property is excluded has the burden of proof of proving that the property fits into the definition. Unfortunately, certain categories are not always clear. For instance, what constitutes a “gift to a spouse from a third party”? When a spouse receives a gift, it is not always clear that the gift is specifically to them and not to both them and their spouse.
Another common problem that can arise is that most couples pool their property and finances to some degree during their spousal relationship, particularly if it is a lengthy relationship. Over time the “excluded property” may be sold and there is not always clarity on what the proceeds of sale are used for and tracing the property can become challenging and sometimes impossible.
Finally, a Court always has the discretion to include “excluded property” in the division of family assets if it would be significantly unfair not to when taking into account the length of the relationship between the spouses and the spouse’s direct contribution to the “excluded property.”
Property division under the Family Law Act is currently a complex area of the law which is still developing and being interpreted in cases which are making their way through the courts. If you have a question or think that you have property which is excluded from division upon the breakdown of a spousal relationship, I recommend that you consult a lawyer for an assessment of your particular situation.