Separation and Divorce

The Financial Repercussions

WHAT ARE YOUR FINANCIAL RIGHTS AND RESPONSIBILITIES IF YOU AND YOUR SPOUSE SEPARATE OR DIVORCE?

THE LAW

The Divorce Act of Canada (enacted by the Federal Government) deals with divorce, child custody and access, and spousal and child maintenance issues, but not matrimonial property; rather, each province has enacted laws to deal with property. In British Columbia the law governing the division of family assets between spouses is contained in the Family Relations Act. The Family Relations Act states that, subject to certain exceptions, each spouse is entitled to one half of each family asset. This raises some obvious questions: What is a family asset? When can a spouse obtain his or her share? What are the exceptions? And, how are assets divided?
 
A separated spouse does not need to start divorce proceedings in order to resolve the issues of custody, access, spousal and child maintenance, and propertydivision, as these matters can be dealt with pursuant to the Family Relations Act.

1. What is a Family Asset?

A family asset is anything of value that is owned by a husband or a wife, and is used by a family member for a family purpose.
 
Obvious examples are the family home, cars and furniture.
 
Other family assets include company pension plans, Canada Pension Plan contributions, annuities, R.R.S.P.s, and savings accounts that are ordinarily used for a family purpose.
 
A company owned by one spouse can also be a family asset, if the other spouse contributed money or monies worth to that company. The company may also be a family asset if the other spouse made what is called an "indirect contribution" to the company. An example of an indirect contribution is effective management of the household or child rearing responsibilities by the non-owning spouse.
 
If a company owned by one spouse owns an asset that is clearly a family asset, such as the family home, then that company may also be considered to be a family asset.
 
Some assets may not be family assets. The excluded assets may be jewelry or items received through gift or inheritance, or assets acquired after the spouses separate, providing those assets were not acquired with money that was derived from other family assets.
 
2. When are You Entitled to Your Share in Family Assets?
 
The family asset issue comes into play as soon as there is a Separation Agreement, a divorce, an annulment, or an Order from a Court that there is no reasonable prospect of reconciliation ("Section 57 Declaration").
 
The majority of separated people negotiate, through their lawyers, a Separation Agreement that deals with all the financial matters. Divorce often occurs after the Seperation Agreement is executed.
 
If the separated spouses cannot agree on the terms of a Separation Agreement and want to resolve their problems, they may commence legal action in order to ask a Judge to resolve the outstanding issues. Most of these cases still settle before trial.
 
3. What are the Exceptions to Equal Sharing of Family Assets?
 
Suppose you have identified and valued the family assets, but you think that an equal division is unfair. Is there any recourse for you?
 
If the seperated spouses cannot agree on the division of assets, the Family Relations Act states that a Judge can reapportion what each spouse should have with regard to the following factors:
 
a) The duration of the marriage. For example, suppose that a wife owned, prior to marriage, a substantial asset, such as a home. Both spouses lived in the home, which would make the home a family asset. If the marriage lasted a short time, for example, for eight months, an equal division of the family home would be unfair;
 
b) The duration of the period in which the spouses lived separate and apart;
 
c) The date when assets were acquired or disposed of;
 
d) The extent to which assets were acquired by one spouse through inheritance or gift;
 
e) The needs of each spouse to become or remain economically independent and self-sufficient; or
 
f) Any other circumstances relating to the acquisition, preservation, maintenance, improvement or use of property, or the capacity or liabilities of the spouse.
 
4. How are Assets Divided between the Spouses?
 
Suppose you have agreed upon the list of family assets and their value, and you have agreed to share the assets equally. In some cases, you cannot split every asset down the middle. If you cannot agree to each of you taking assets of equal value, it may be appropriate to sell an asset in order to equalize the division.
 
5. Summary
 
To summarize, each spouse is entitled to a one half share of family assets upon a "triggering event", such as a divorce or a Separation Agreement, unless an equal share of family assets would be unfair.
 
The law is complex, and each situation is very different, with numerous factors to consider, such as maintenance for either spouse, debts, the arrangements for the children, or the existence of a Marriage Contract. Remember that no separation is exactly the same as another.
 
The legal information in this article applies as a general rule, but it might very well change depending upon the specific circumstances of each case. Accordingly, you should consult a lawyer privately before acting on any legal information given in this article.