Source: https://wiki.clicklaw.bc.ca/index.php?title=Basic_Principles_of_Property_%26_Debt_in_Family_Law&curid=181&diff=44438&oldid=43931
Timestamp: 2019-08-23 20:55:27
Document Index: 127099195

Matched Legal Cases: ['art 5', 'art 6', 'art 5', 'art 6', 'art 5', 'arts 5', 'art 5', 'art 6', 'art 5', 'arts 5', 'art 5', 'art 6']

Difference between revisions of "Basic Principles of Property & Debt in Family Law" - Clicklaw Wikibooks
Difference between revisions of "Basic Principles of Property & Debt in Family Law"
Revision as of 12:08, 27 June 2019 (view source)
Revision as of 11:40, 18 July 2019 (view source)
===Period of entitlement===
Under s. 81(a) of the ''Family Law Act'', spouses are presumed to each be entitled to an equal share in ''family property''. Family property is defined at s. 84(1) as:
Under section 81(a) of the ''Family Law Act'', spouses are presumed to each be entitled to an equal share in ''family property''. Family property is defined at section 84(1) as:
<blockquote><tt>(a) on the date the spouses separate, property</tt></blockquote>
<blockquote><blockquote><tt>(ii) in which at least one spouse has a beneficial interest</tt></blockquote></blockquote>
The ''end date'' for the accumulation of family property is presumed to be the date of separation. The ''start date'' is the date the spouses' relationship begins, and is found in the definition of ''excluded property'' at s. 85:
The ''end date'' for the accumulation of family property is presumed to be the date of separation. The ''start date'' is the date the spouses' relationship begins, and is found in the definition of ''excluded property'' at section 85:
<blockquote><tt>(1) The following is excluded from family property:</tt></blockquote>
<blockquote><blockquote><tt>(a) property acquired by a spouse before the relationship between the spouses began</tt></blockquote></blockquote>
The start date and the end date with respect to the accumulation of ''family debt'' is stated more simply in s. 86:
The start date and the end date with respect to the accumulation of ''family debt'' is stated more simply in section 86:
<blockquote><tt>Family debt includes all financial obligations incurred by a spouse</tt></blockquote>
#unmarried spouses must bring their claim within two years of the date of ''separation''.
Under s. 198(5), however, the running of this time limit is considered to be suspended while the parties are engaged in ''family dispute resolution'' with a ''family dispute resolution professional''. Both of these terms are defined in s. 1, and the running of the time limit will not stop if their dispute resolution process doesn't fall within the definition of "family dispute resolution" or if the spouses are not using the services of someone who falls within the definition of "family dispute resolution professional."
Under section 198(5), however, the running of this time limit is considered to be suspended while the parties are engaged in ''family dispute resolution'' with a ''family dispute resolution professional''. Both of these terms are defined in section 1, and the running of the time limit will not stop if their dispute resolution process doesn't fall within the definition of "family dispute resolution" or if the spouses are not using the services of someone who falls within the definition of "family dispute resolution professional."
===A partnership of acquests===
Under the ''Family Relations Act'', married spouses shared in all property that was "ordinarily used for a family purpose." This meant that you didn't need to look at who owned something on paper, how something was acquired, or whether property was acquired before or during the relationship; what mattered was how the property was ''used''. For most couples, ''everything'' they had wound up being ordinarily used for a family purpose in one way or another.
Under the ''Family Law Act'', use is irrelevant. In fact that's exactly what s. 81(a) says:
Under the ''Family Law Act'', use is irrelevant. In fact that's exactly what section 81(a) says:
<blockquote><tt>spouses are both entitled to family property and responsible for family debt, regardless of their respective use or contribution</tt></blockquote>
====Transition provisions====
The ''Family Law Act'' became law in British Columbia on 18 March 2013. All of the parts of the act about children and support applied to everyone right away, including people who were in the middle of a court proceeding. However, under s. 252(2), married spouses who had started a court proceeding about the division of property or had an agreement about the division of property must continue under the old ''Family Relations Act'' as if it hadn't been cancelled, unless the spouses agree otherwise:
The ''Family Law Act'' became law in British Columbia on 18 March 2013. All of the parts of the act about children and support applied to everyone right away, including people who were in the middle of a court proceeding. However, under section 252(2), married spouses who had started a court proceeding about the division of property or had an agreement about the division of property must continue under the old ''Family Relations Act'' as if it hadn't been cancelled, unless the spouses agree otherwise:
<blockquote><tt>(2) Unless the spouses agree otherwise, </tt></blockquote>
==Who gets what under the ''Family Law Act''==
The general rule about how property and debt are divided under the ''Family Law Act'' is found in s. 81:
Property division is covered under Part 5 of the ''Family Law Act''. The general rule for how property and debt get divided up is found under section 81:
<blockquote><tt>Subject to an agreement or order that provides otherwise and except as set out in this Part and Part 6 [Pension Division],</tt></blockquote>
===Family property and family debt===
Family property is defined at s. 84(1) as all of the property owned by either or both spouses ''on the date of their separation''. Family property includes property that is bought ''after separation'' with family property, for example if a spouse uses money from a joint bank account to buy a new car, after separation, the new car will be family property. Simply stated, if the original source of the funds used to purchase a new asset after separation is from family property (i.e. use tracing provisions), the new asset will also be found to be family property even though the new asset was purchased after separation. As well, if a spouse owns real property with a third party(i.e. with a parent) that portion of the real property that is registered in the spouse's name may be found to be family property, subject always to trust claims made by the third party.
Family property is defined at section 84(1) as all of the property owned by either or both spouses ''on the date of their separation''. Family property includes property that is bought ''after separation'' with family property, for example if a spouse uses money from a joint bank account to buy a new car, after separation, the new car will be family property. Simply stated, if the original source of the funds used to purchase a new asset after separation is from family property (i.e. use tracing provisions), the new asset will also be found to be family property even though the new asset was purchased after separation. As well, if a spouse owns real property with a third party(i.e. with a parent) that portion of the real property that is registered in the spouse's name may be found to be family property, subject always to trust claims made by the third party.
Section 84(2) gets into the specifics of the sorts of things that might be family property:
*property in a trust that the spouse created and can get back.
Perhaps most importantly, under s. 84(2)(g), family property includes the increase in value of a spouse's ''excluded property'' after it was received or brought into the relationship.
Perhaps most importantly, under section 84(2)(g), family property includes the increase in value of a spouse's ''excluded property'' after it was received or brought into the relationship.
The definition of family debt is at s. 86 and is much shorter:
The definition of family debt is at section 86 and is much shorter:
====The valuation of property and valuation date====
Although the pool of family property to be shared between spouses is crystallized when the separation happens, under s. 87(b), the ''value'' of the family property is not fixed until the date of the trial or agreement that divides the property. This makes sense, because it can take two or three years for the division of property to wrap up at a trial, and it can take four or five months to finish an agreement for the division of property. With respect to daily use bank accounts (i.e. bank account where your pay is deposited and you pay your monthly bills), it has become more common for the court to value such bank accounts based on its value as at the date of separation instead of the date of the trial or agreement.
Although the pool of family property to be shared between spouses is crystallized when the separation happens, under section 87(b), the ''value'' of the family property is not fixed until the date of the trial or agreement that divides the property. This makes sense, because it can take two or three years for the division of property to wrap up at a trial, and it can take four or five months to finish an agreement for the division of property. With respect to daily use bank accounts (i.e. bank account where your pay is deposited and you pay your monthly bills), it has become more common for the court to value such bank accounts based on its value as at the date of separation instead of the date of the trial or agreement.
Under s. 87(a), the value of property is its ''fair market value'', the amount a reasonable buyer would pay for the property ''in its current condition'', not the purchase price of the property, the insured value of the property, or the replacement cost of the property. In other words, the value of the reconstituted leather living room suite you got from the Brick for $999 five years ago isn't what ''you'' paid for it, it's the $100 that someone would likely give you for it at the date of the trial or agreement.
Under section 87(a), the value of property is its ''fair market value'', the amount a reasonable buyer would pay for the property ''in its current condition'', not the purchase price of the property, the insured value of the property, or the replacement cost of the property. In other words, the value of the reconstituted leather living room suite you got from the Brick for $999 five years ago isn't what ''you'' paid for it, it's the $100 that someone would likely give you for it at the date of the trial or agreement.
===Excluded property===
The definition of ''family property'' at s. 84 starts from the assumption that ''all property'' either or both spouses own on the date of separation is shareable family property. Under s. 85(2), the spouse who claims that an asset should be excluded from the pool of family property is responsible for proving that the asset is ''excluded property''.
The definition of ''family property'' at section 84 starts from the assumption that ''all property'' either or both spouses own on the date of separation is shareable family property. Under section 85(2), the spouse who claims that an asset should be excluded from the pool of family property is responsible for proving that the asset is ''excluded property''.
Excluded property is defined at s. 85(1):
Excluded property is defined at section 85(1):
<blockquote><tt>(1) The following is excluded from family property: </tt></blockquote>
*property held in a trust that was contributed by someone else.
Perhaps most importantly, under s. 85(1)(g), excluded property includes property bought during the relationship with excluded property. Say, for example, that a spouse receives an inheritance of $10,000 and buys a collection of vintage Pyrex. The Pyrex collection would be that spouse's excluded property because it was bought with excluded property, even if the Pyrex collection was used in the day-to-day course of the couple's life together. Remember, whether something was "ordinarily used for a family purpose" is not a consideration under the ''Family Law Act''.
Perhaps most importantly, under section 85(1)(g), excluded property includes property bought during the relationship with excluded property. Say, for example, that a spouse receives an inheritance of $10,000 and buys a collection of vintage Pyrex. The Pyrex collection would be that spouse's excluded property because it was bought with excluded property, even if the Pyrex collection was used in the day-to-day course of the couple's life together. Remember, whether something was "ordinarily used for a family purpose" is not a consideration under the ''Family Law Act''.
However, where a married person puts what would be excluded property in the name of the other spouse, it may be that the excluded property becomes family property. Similarly, where a parent gives money or property during the relationship, it is open to the son-in-law or daughter-in-law, or the common law spouse, to argue that it was a gift to the couple and is not excluded property. The law in this area is in flux (as there are currently two lines of authority), so it is difficult to give a definitive answer as to what law applies. Even lawyers find this area of law difficult, so do not be upset if you are confused about this area of law.
However, where a married person puts what would be excluded property in the name of the other spouse, it may be that the excluded property becomes family property. Similarly, where one spouse's parent gives money or property during the relationship, the other spouse might argue that it was a gift to the couple and is not excluded property. The law in this area is in flux (as there are currently two lines of authority), so it is difficult to give a definitive answer as to what law applies. Even lawyers find this area of law difficult, so do not be upset if you are confused about this area of law.
====Taking stock at the beginning of a relationship====
*records any changes in the value of excluded property during the relationship.
Remember, under s. 85(2) it's up to the person claiming that the property is excluded property to prove it.
Remember, under section 85(2) it's up to the person claiming that the property is excluded property to prove it.
==Who got what under the ''Family Relations Act''==
Because of the transition provisions of s. 252 of the ''Family Law Act'', the old ''Family Relations Act'', even though it's been cancelled, will still apply to determine the division of property between married spouses if:
Because of the transition provisions of section 252 of the ''Family Law Act'', the old ''Family Relations Act'', even though it's been cancelled, will still apply to determine the division of property between married spouses if:
*they started a court proceeding to divide property before 18 March 2013, the date when the ''Family Law Act'' came into effect,
<blockquote><tt>(2) ... as a tenant in common.</tt></blockquote>
As long as an asset qualified under the act as a ''family asset'', each spouse was presumed to have a one-half interest in that asset. Family assets were defined in s. 58(2) of the act, and the focus under the act was on how an asset was ''used during the relationship'' rather than on who bought it, when it was bought, or how it was bought:
As long as an asset qualified under the act as a ''family asset'', each spouse was presumed to have a one-half interest in that asset. Family assets were defined in section 58(2) of the act, and the focus under the act was on how an asset was ''used during the relationship'' rather than on who bought it, when it was bought, or how it was bought:
<blockquote><tt>Property owned by one or both spouses and ordinarily used by a spouse or a minor child of either spouse for a family purpose is a family asset.</tt></blockquote>
===The equal and unequal division of family assets===
Under s. 56 of the ''Family Relations Act'', each spouse was presumed to have a one-half interest in all family assets. This was, however, only a presumption, a presumption that could be challenged. When assets were divided more in one spouse's favour than the other, the assets were said to have been ''reapportioned''.
Under section 56 of the ''Family Relations Act'', each spouse was presumed to have a one-half interest in all family assets. This was, however, only a presumption, a presumption that could be challenged. When assets were divided more in one spouse's favour than the other, the assets were said to have been ''reapportioned''.
The court could order, or the spouses could agree, that all of the family assets would be reapportioned or that just a few assets would be reapportioned. This might have happened to allow one party to keep more of a pension or more of an inheritance, for example, even though all the other family assets might have been divided equally.
Not all assets were shareable family assets. The sections of the ''Family Relations Act'' quoted above only provided for the division of assets that qualified as ''family assets''; other sorts of assets might have been exempt from division, so that the spouse who owned the asset would be allowed to keep that asset, without necessarily having to compensate the other spouse for its value.
Family assets were defined in s. 58 of the ''Family Relations Act'' as:
Family assets were defined in section 58 of the ''Family Relations Act'' as:
<blockquote><tt>(2) Property owned by one or both spouses and ordinarily used by a spouse or a minor child of either spouse for a family purpose is a family asset.</tt></blockquote>
[[Cohabitation Agreements|Cohabitation agreements]] are agreements signed by people who will be or are living together, who may or may not wind up getting married later on down the road. [[Marriage Agreements|Marriage agreements]] are signed by people who will be getting, or are, married. Although there's no reason why these agreements can't be signed well into a relationship, they're usually signed on or shortly after the date the parties begin to live together or marry.
These agreements are often used to say how property and debt will be handled during a relationship and how it will be allocated if the couple separates. Under s. 93(1) of the ''Family Law Act'', they must be in writing and be signed by each spouse in the presence of at least one other person as a witness. It is highly recommended that you both obtain independent legal advice from a lawyer (do not use the same lawyer, each must have a separate lawyer) before signing such an agreement to ensure that each party fully understands the nature and circumstances of the agreement and what is being given up.
These agreements are often used to say how property and debt will be handled during a relationship and how it will be allocated if the couple separates. Under section 93(1) of the ''Family Law Act'', they must be in writing and be signed by each spouse in the presence of at least one other person as a witness. It is highly recommended that you both obtain independent legal advice from a lawyer (do not use the same lawyer, each must have a separate lawyer) before signing such an agreement to ensure that each party fully understands the nature and circumstances of the agreement and what is being given up.
However, since many people are content with the basic plan for the division of property set out in the ''Family Law Act'', the question is often about what a cohabitation agreement or a marriage agreement can do that would be better than the division the act expects. Here are some ideas. An agreement could:
Revision as of 11:40, 18 July 2019
Under the Family Law Act, spouses who are married or who lived together in a marriage-like relationship for at least two years are entitled to share in the property they acquired during their relationship, and to keep any property they each brought into the relationship. The same thing goes for debt. Spouses are equally responsible for the debt they accumulated during the relationship, but they are separately responsible for any debt that they had going into the relationship.
This all sounds pretty straightforward, but there are lots of details that can make the division of property and debt complicated.
This section talks about how property and debt are divided between spouses under the Family Law Act and how they used to be divided under the Family Relations Act, what property is shareable family property, and what property is excluded from division. It also looks at the role marriage agreements and cohabitation agreements can play in controlling the impact of the Family Law Act.
1.1 Standing
1.2 Period of entitlement
1.2.1 Date of cohabitation and the date of marriage
1.2.2 The date of separation
1.2.3 Time limits
1.3 A partnership of acquests
1.3.1 The Family Relations Act and the Family Law Act
1.3.2 Transition provisions
2 Who gets what under the Family Law Act
2.1 Family property and family debt
2.1.1 Separation
2.1.1.1 How property is owned
2.1.1.2 The effect of the Separation
2.1.2 The valuation of property and valuation date
2.2 Excluded property
2.2.1 Taking stock at the beginning of a relationship
2.2.2 Keeping track during a relationship
3 Who got what under the Family Relations Act
3.1 The presumption of equal sharing
3.2 The triggering events
3.3 The equal and unequal division of family assets
3.4 Defining "family assets"
4 Cohabitation agreements and marriage agreements
The basic plan for the division of property and debt under the provincial Family Law Act is pretty straightforward. You keep what you bring into the relationship, and you split what you get and accumulated (i.e. increase in value of excluded property) during the relationship. Of course it's a lot more complicated than this, but that's the basic concept the act is built on.
Part 5 of the Family Law Act deals with the division of property and debt, and provides the definitions of family property and family debt, the things that are presumed to be shared between spouses, and excluded property, which is presumed to remain the property of the spouse who owns it. Part 6 of the Family Law Act talks about the division of pensions between spouses and says which portion of a pension is supposed to be shared and which parts remain the property of the pension member.
This section looks into the nooks and crannies of Part 5 of the act in some detail, but it doesn't say much about pensions because the division of pensions can be extremely complicated. For information about that, you should speak to a family law lawyer. A pension can be a very valuable asset. It is important to include it when dividing property.
The people who are entitled to ask to divide property and debt are spouses, but not all spouses, just spouses who are married to each other or who have lived together in a marriage-like relationship for at least two years. Section 3 says this:
(ii) except in Parts 5 [Property Division] and 6 [Pension Division], has a child with the other person.
Unmarried spouses who have lived together for less than two years are not eligible to ask for orders about the division of property or debt under the Family Law Act. The rules about property that apply to these spouses and other people who aren't spouses are discussed in the first section in this chapter, under the heading "property claims and people who aren't spouses," and in the chapter Family Relationships in the section Other Unmarried Relationships.
Period of entitlement[edit]
Under section 81(a) of the Family Law Act, spouses are presumed to each be entitled to an equal share in family property. Family property is defined at section 84(1) as:
(a) on the date the spouses separate, property
(i) that is owned by at least one spouse, or
(ii) in which at least one spouse has a beneficial interest
The end date for the accumulation of family property is presumed to be the date of separation. The start date is the date the spouses' relationship begins, and is found in the definition of excluded property at section 85:
(1) The following is excluded from family property:
(a) property acquired by a spouse before the relationship between the spouses began
The start date and the end date with respect to the accumulation of family debt is stated more simply in section 86:
(a) during the period beginning when the relationship between the spouses begins and ending when the spouses separate
As you can see, the date when "the relationship between the spouses began" and the date "the spouses separate" are very important. These are the dates that mark the end of acquiring excluded property and personal debt, the start of acquiring shareable family property and family debt, and the end of acquiring family property and family debt.
Date of cohabitation and the date of marriage[edit]
Section 3(3) says when a relationship between spouses begins:
(3) A relationship between spouses begins on the earlier of the following:
For married spouses, their relationship starts on the earlier of the date they began to live together in a marriage-like relationship or got married. For unmarried spouses, once the parties have lived together for two years, their relationship as spouses is considered to have started on the date they began to live together.
The date of a couple's marriage is pretty obvious. It isn't always so obvious when a couple "begins" to live together in a marriage-like relationship. The judge in a 2003 case from the Saskatchewan Court of Queen's Bench, Yakiwchuk v. Oaks, 2003 SKQB 124, expressed the problem this way:
"With married couples, the relationship is easy to establish. The marriage ceremony is a public declaration of their commitment and intent. Relationships outside marriage are much more difficult to ascertain. Rarely is there any type of 'public' declaration of intent. Often people begin cohabiting with little forethought or planning. Their motivation is often nothing more than wanting to 'be together'. Some individuals have chosen to enter relationships outside marriage because they did not want the legal obligations imposed by that status. Some individuals have simply given no thought as to how their relationship would operate. Often the date when the cohabitation actually began is blurred because people 'ease into' situations, spending more and more time together. Agreements between people verifying when their relationship began and how it will operate often do not exist."
Hands up, anyone who has ever begun to "cohabit with little forethought or planning?"
The date of separation[edit]
Separation usually happens when one spouse decides that the relationship cannot continue, says so, and then takes steps to end the partnership-like qualities of the relationship, usually by stopping sleeping together, stopping doing chores for the other person, stopping going out together as a couple, and so on. Section 3(4) offers some guidance on when a spousal relationship ends.
It's easy to imagine that the date of separation could be argued about, especially if the spouses reconciled for a bit or if a spouse's commitment to ending the partnership-like aspect of a relationship wavered from time to time. In order to avoid spending money on lawyers arguing about this issue, you might consider documenting the date of separation in some way, perhaps by sending a letter or an email to your spouse stating your intention to separate. Do remember to keep a copy.
Time limits[edit]
Section 198(2) of the Family Law Act sets out some important time limits on when claims for the division of property and debt can be brought:
married spouses must bring their claim within two years of the date of their divorce or a declaration annulling their marriage, and
unmarried spouses must bring their claim within two years of the date of separation.
Under section 198(5), however, the running of this time limit is considered to be suspended while the parties are engaged in family dispute resolution with a family dispute resolution professional. Both of these terms are defined in section 1, and the running of the time limit will not stop if their dispute resolution process doesn't fall within the definition of "family dispute resolution" or if the spouses are not using the services of someone who falls within the definition of "family dispute resolution professional."
A partnership of acquests[edit]
The scheme for the division of property under the Family Law Act is technically described as a deferred partnership of acquests regime. Under the old Family Relations Act, property was divided under a deferred community of property regime. A "partnership of acquests" scheme for family property means that the spouses both own all of the property acquired during their relationship, whether the property is owned by one spouse or by both spouses jointly; our model is "deferred" because the right to an equal share in this property doesn't arise until the spouses have separated.
The Family Relations Act and the Family Law Act[edit]
Under the Family Relations Act, married spouses shared in all property that was "ordinarily used for a family purpose." This meant that you didn't need to look at who owned something on paper, how something was acquired, or whether property was acquired before or during the relationship; what mattered was how the property was used. For most couples, everything they had wound up being ordinarily used for a family purpose in one way or another.
Under the Family Law Act, use is irrelevant. In fact that's exactly what section 81(a) says:
spouses are both entitled to family property and responsible for family debt, regardless of their respective use or contribution
What matters now is when property was acquired and how property was acquired. Property bought before the spouses' relationship began is presumed to be excluded property; property bought during the spouses' relationship with excluded property is also presumed to be excluded property. Under a deferred community of property regime, both spouses are presumed to have an interest in all assets on the date of separation. Under a deferred partnership of acquests regime, the spouses are presumed to have an interest in only the assets they accumulated during their relationship on the date of separation, except for any assets bought with excluded property.
Transition provisions[edit]
The Family Law Act became law in British Columbia on 18 March 2013. All of the parts of the act about children and support applied to everyone right away, including people who were in the middle of a court proceeding. However, under section 252(2), married spouses who had started a court proceeding about the division of property or had an agreement about the division of property must continue under the old Family Relations Act as if it hadn't been cancelled, unless the spouses agree otherwise:
(2) Unless the spouses agree otherwise,
(a) a proceeding to enforce, set aside or replace an agreement respecting property division made before the coming into force of this section, or
(b) a proceeding respecting property division started under the former Act
must be started or continued, as applicable, under the former Act as if the former Act had not been repealed.
This rule only applies to married spouses because only married spouses could make property claims under the Family Relations Act; it is not possible for unmarried spouses to "start or continue" a claim under that act.
The division of family property under the Family Relations Act is discussed later on in this section.
Who gets what under the Family Law Act[edit]
Property division is covered under Part 5 of the Family Law Act. The general rule for how property and debt get divided up is found under section 81:
Subject to an agreement or order that provides otherwise and except as set out in this Part and Part 6 [Pension Division],
(a) spouses are both entitled to family property and responsible for family debt, regardless of their respective use or contribution, and
The rest of Part 5 concerns:
the definitions of "family property" and "family debt," and what is excluded from family property,
the rules for how the division of property and debt are to be accomplished, and the exceptions to those rules,
orders for the division of property and debt, and the circumstances when the court can divide family property unequally or divide excluded property, and
agreements for the division of property when the court may set those agreements aside.
Family property and family debt[edit]
Family property is defined at section 84(1) as all of the property owned by either or both spouses on the date of their separation. Family property includes property that is bought after separation with family property, for example if a spouse uses money from a joint bank account to buy a new car, after separation, the new car will be family property. Simply stated, if the original source of the funds used to purchase a new asset after separation is from family property (i.e. use tracing provisions), the new asset will also be found to be family property even though the new asset was purchased after separation. As well, if a spouse owns real property with a third party(i.e. with a parent) that portion of the real property that is registered in the spouse's name may be found to be family property, subject always to trust claims made by the third party.
(3) Despite subsection (1) of this section and subject to section 85 (1) (e), family property includes that part of trust property contributed by a spouse to a trust in which
(a) the spouse is a beneficiary, and has a vested interest in that part of the trust property that is not subject to divestment,
(b) the spouse has a power to transfer to himself or herself that part of the trust property, or
(c) the spouse has a power to terminate the trust and, on termination, that part of the trust property reverts to the spouse.
Boiling this all down somewhat, family property includes:
a spouse's business, regardless of the nature of the business interest,
money owed to a spouse,
bank accounts, savings accounts, investment accounts and pension accounts,
family property that a spouse transferred after separation but can get back, and
property in a trust that the spouse created and can get back.
Perhaps most importantly, under section 84(2)(g), family property includes the increase in value of a spouse's excluded property after it was received or brought into the relationship.
In other words, all of the debt accumulating from the date the spouses began to live together or got married, whichever is earlier, to the date of separation is family debt. Family debt includes debt that is incurred after separation if the debt was incurred for family property, for example if a spouse takes out a loan to make the mortgage payments on the family home. Since the family home is family property, the loan is a family debt that both spouses are responsible for.
When the spouses separate, all of the family property owned by either or both spouses becomes equally owned by both spouses as tenants in common. If only one spouse owns an asset, both of the spouses become equal owners of the asset as tenants in common. If both spouses own an asset as joint tenants, the joint tenancy is severed and both of the spouses become equal owners of the asset as tenants in common. This is all a bit complicated to explain, so please bear with me.
How property is owned[edit]
There are two ways that more than one person can own the same property in British Columbia: they can own the property as "joint tenants" or as "tenants in common."
When two or more people own a thing as joint tenants, they are each owners of the whole thing. This is a fuzzy kind of shared ownership because the interests of one owner can't be separated out from the interests of the other because they each own the whole thing. To put it another way, a joint tenant doesn't own a particular slice of the pie, a joint tenant owns the whole pie.
When a joint tenant dies, their interest in the asset disappears, and the surviving joint tenants continue to own the whole asset as they always had. As a result, joint tenancies are extremely handy estate planning tools.
When people own a thing as tenants in common, each owner's interest in a property is separate and distinct. The tenants in common of a property each own their particular slice of the pie; collectively, they all own the whole pie, but individually they just own their personal share.
Because each owner's interest is separate from the other owners, a tenant in common can sell their share in the asset to someone else, put a mortgage on their interest or use it as collateral, or give it to someone else as a gift. If a tenant in common dies, their interest in the thing becomes a part of their estate to be distributed according to their will.
The effect of the Separation[edit]
S. 81(b) of the Family Law Act states:
on separation, each spouse has a right to an undivided half interest in all family property as a tenant in common, and is equally responsible for family debt.
From a family law perspective, the most important thing about owning an asset as tenants in common, which is how assets are owned after the spouses separate, is this idea of two separate interests in an asset. Say the family home is registered in only one spouse's name and that spouse goes bankrupt. If there has been a separation and each spouse takes a one-half interest as a tenant in common, the only part of the house that can be taken by the bankrupt spouse's trustee is the bankrupt spouse's one-half interest; the other spouse's interest in that asset will be preserved from the bankrupt spouse's creditors, and it doesn't matter who owns the asset on paper. This can be hugely important.
Family law lawyers describe the effect of a separation as "crystallizing" the spouses' interests in the family property because the separation makes each spouse the legal owner of one-half of the family assets in a way that is also binding on people outside the relationship, like creditors, trustees in bankruptcy, potential purchasers, and so forth. After a separation happens, all a creditor can lien or seize to secure or pay a debt is the debtor's half-share of an asset, regardless of whether the debtor was the sole owner or the joint owner of the asset before the separation.
Under the Family Law Act there is no requirement that the parties start a court proceeding or sign an agreement in order to be separated.
The valuation of property and valuation date[edit]
Although the pool of family property to be shared between spouses is crystallized when the separation happens, under section 87(b), the value of the family property is not fixed until the date of the trial or agreement that divides the property. This makes sense, because it can take two or three years for the division of property to wrap up at a trial, and it can take four or five months to finish an agreement for the division of property. With respect to daily use bank accounts (i.e. bank account where your pay is deposited and you pay your monthly bills), it has become more common for the court to value such bank accounts based on its value as at the date of separation instead of the date of the trial or agreement.
Under section 87(a), the value of property is its fair market value, the amount a reasonable buyer would pay for the property in its current condition, not the purchase price of the property, the insured value of the property, or the replacement cost of the property. In other words, the value of the reconstituted leather living room suite you got from the Brick for $999 five years ago isn't what you paid for it, it's the $100 that someone would likely give you for it at the date of the trial or agreement.
Excluded property[edit]
The definition of family property at section 84 starts from the assumption that all property either or both spouses own on the date of separation is shareable family property. Under section 85(2), the spouse who claims that an asset should be excluded from the pool of family property is responsible for proving that the asset is excluded property.
(a) property acquired by a spouse before the relationship between the spouses began;
(b) gifts or inheritances to a spouse;
(c) a settlement or an award of damages to a spouse as compensation for injury or loss, unless the settlement or award represents compensation for
(i) loss to both spouses, or
(ii) lost income of a spouse;
(d) money paid or payable under an insurance policy, other than a policy respecting property, except any portion that represents compensation for
(e) property referred to in any of paragraphs (a) to (d) that is held in trust for the benefit of a spouse;
(f) property held in a discretionary trust
(i) to which the spouse did not contribute,
(ii) of which the spouse is a beneficiary, and
(iii) that is settled by a person other than the spouse;
(g) property derived from property or the disposition of property referred to in any of paragraphs (a) to (f).
To boil all this down, a spouse's excluded property is all the property that the spouse owns on the date of cohabitation or the date of marriage, whichever is earlier. Other property acquired during the relationship can also be a spouse's excluded property, including:
gifts (provided that the gift is to the spouse alone and not a gift to the couple),
court awards,
insurance payments, and
property held in a trust that was contributed by someone else.
Perhaps most importantly, under section 85(1)(g), excluded property includes property bought during the relationship with excluded property. Say, for example, that a spouse receives an inheritance of $10,000 and buys a collection of vintage Pyrex. The Pyrex collection would be that spouse's excluded property because it was bought with excluded property, even if the Pyrex collection was used in the day-to-day course of the couple's life together. Remember, whether something was "ordinarily used for a family purpose" is not a consideration under the Family Law Act.
Taking stock at the beginning of a relationship[edit]
As you can see, it's rather important to know what you owned when you and your spouse began to live together. If you are just starting a relationship, here's what you do.
First, gather the documents listed below for the period that spans the date on which you and your spouse began to live together or got married, whichever is earlier:
statements for all financial accounts, including savings accounts, investment accounts, RRSP accounts, and other retirement savings accounts,
statements for any workplace pension plans,
statements for all credit accounts, including credit cards, loans, mortgages, and lines of credit,
your personal income tax return, complete with all of the schedules and attachments,
your BC Assessments for all real property, or, if you want to be more accurate than that, proper appraisals,
black book values or dealer quotes for any vehicles you own,
appraisals for works of art and collections, and
anything else that helps to establish the value of something you brought into the relationship in a credible way.
Next, once you've gathered these documents, staple them together and keep them together in some place that you're not likely to lose them, like a safety deposit box.
You should still be able to gather much the same collection of documents even if you've already been married or living together for some time. Banks and other financial institutions will give you copies of old statements, but there will be a charge; pension plan administrators should be able to provide old values; and, BC Assessments for past years are available online. You may, however, have a problem valuing old vehicles.
Keeping track during a relationship[edit]
It's also important that you keep track of new excluded property acquired during your relationship, and what's going on with the excluded property you brought into the relationship. It may be easiest to keep a journal that:
shows the dates and amounts of any inheritances, gifts, court awards, and insurance proceeds received during the relationship,
tracks money received from the sale of excluded property, and what you did with the money, particularly if the money was pooled with your spouse's money to buy something,
with respect to gifts, keep documents evidencing the intention of the donor (i.e. a letter or card from the donor parent confirming that the gift of $100,000 was to you and not to you and your spouse),
tracks property bought in exchange for excluded property,
shows the intent of any gift or transfer of property, and
records any changes in the value of excluded property during the relationship.
Who got what under the Family Relations Act[edit]
Because of the transition provisions of section 252 of the Family Law Act, the old Family Relations Act, even though it's been cancelled, will still apply to determine the division of property between married spouses if:
they started a court proceeding to divide property before 18 March 2013, the date when the Family Law Act came into effect,
a spouse wants to start a court proceeding to enforce or set aside an agreement about property that was signed before 18 March 2013.
As a resut, it's going to be important to know how family property is divided under the Family Relations Act for a while longer.
The division and distribution of property between married spouses was governed by Parts 5 and 6 of the Family Relations Act. Part 5 of the act dealt with the division of property, including personal property, financial assets, and real estate. Part 6 dealt with the division of pensions. Unmarried couples, including couples who qualify as unmarried spouses, were expressly excluded from the parts of the act that deal with property.
The presumption of equal sharing[edit]
When a marriage breaks down, each spouse was presumed to have a one-half interest in all assets that qualify as family assets. Section 56 of the Family Relations Act said that:
(2) ... as a tenant in common.
As long as an asset qualified under the act as a family asset, each spouse was presumed to have a one-half interest in that asset. Family assets were defined in section 58(2) of the act, and the focus under the act was on how an asset was used during the relationship rather than on who bought it, when it was bought, or how it was bought:
Property owned by one or both spouses and ordinarily used by a spouse or a minor child of either spouse for a family purpose is a family asset.
This section cast a very broad net: as long as an asset was owned by a spouse and was ordinarily used for a family purpose, the asset would be a "family asset" for the purposes of the Family Relations Act, and it didn't matter whether the asset was brought into the marriage by one spouse, or bought during the marriage.
To summarize, when a marriage breaks down, the spouses are presumed to own all family assets equally, no matter whose name the asset is in or whether the asset was brought into the marriage by one spouse or bought during the marriage. This presumption, however, only applies between spouses. As far as the rest of the world was concerned, the only owner of an asset is the person with legal title to the asset, which might be:
one of the spouses,
both spouses as joint tenants,
both spouses as tenants in common, or
one or both spouses, along one or more other people, either as joint tenants or as tenants in common.
The triggering events[edit]
When a triggering event happened, all of the property owned by either or both spouses became equally owned by both spouses as tenants in common. If only one spouse owned an asset, both of the spouses became equal owners of that asset as tenants in common. If both spouses owned an asset as joint tenants, the joint tenancy was severed and both of the spouses became equal owners of the asset as tenants in common.
Family law lawyers described the effect of a triggering event as "crystallizing" the interests of the spouses in the family assets because the triggering event made each spouse a legal owner of one-half of the family assets in a way that was also binding on people outside the marriage, like creditors, trustees in bankruptcy, potential purchasers, and so forth. After a triggering event happened, all a creditor could lien or seize was the debtor's half-share of an asset, regardless of whether the debtor was the sole owner or the joint owner of the asset before the triggering event.
Section 56(1) of the Family Relations Act described four triggering events:
when the parties made and signed a separation agreement,
when the court made a declaration that the spouses had no reasonable prospect of getting back together and resuming married life,
when the court made an order for divorce, and
when the marriage was annulled.
Once any one of these triggering events happened, each spouse took a one-half legal interest in all of the family assets as a tenant in common, regardless of who bought the asset, who used to own the asset, or when the asset was bought. This new situation lasted until the division of the assets was finally determined by a court order or the parties' agreement.
The equal and unequal division of family assets[edit]
Under section 56 of the Family Relations Act, each spouse was presumed to have a one-half interest in all family assets. This was, however, only a presumption, a presumption that could be challenged. When assets were divided more in one spouse's favour than the other, the assets were said to have been reapportioned.
Section 65(1) of the Family Relations Act described the factors the court could take into account in deciding whether an equal division of the family assets would have been unfair:
(a) the duration of the marriage,
(b) the duration of the period during which the spouses have lived separate and apart,
(c) the date when property was acquired or disposed of,
(d) the extent to which property was 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 a spouse
Family assets were most commonly reapportioned when:
the marriage was short, say less than six or seven years, and one of the spouses brought the majority of the assets into the relationship,
one of the spouses was responsible for racking up a lot of debts not related to spending for family purposes,
some of the assets were located outside of British Columbia,
one of the spouses required more than half of the family assets to become financially independent,
one of the spouses had wrongfully disposed of family assets or negligently allowed them to decrease in value, especially if this happened after separation, or
some of the assets had been bought with a spouse's inheritance.
Defining "family assets"[edit]
Not all assets were shareable family assets. The sections of the Family Relations Act quoted above only provided for the division of assets that qualified as family assets; other sorts of assets might have been exempt from division, so that the spouse who owned the asset would be allowed to keep that asset, without necessarily having to compensate the other spouse for its value.
Family assets were defined in section 58 of the Family Relations Act as:
(2) Property owned by one or both spouses and ordinarily used by a spouse or a minor child of either spouse for a family purpose is a family asset.
(3) Without restricting subsection (2), the definition of family asset includes the following:
(a) if a corporation or trust owns property that would be a family asset if owned by a spouse,
(i) a share in the corporation, or
(ii) an interest in the trust
owned by the spouse;
(b) if property would be a family asset if owned by a spouse, property
(i) over which the spouse has, either alone or with another person, a power of appointment exercisable in favour of himself or herself, or
(ii) disposed of by the spouse but over which the spouse has, either alone or with another person a power to revoke the disposition or a power to use or dispose of the property;
(c) money of a spouse in an account with a savings institution if that account is ordinarily used for a family purpose;
(d) a right of a spouse under an annuity or a pension, home ownership or retirement savings plan;
(e) a right, share or an interest of a spouse in a venture to which money or money's worth was, directly or indirectly, contributed by or on behalf of the other spouse.
If an asset did not fall into these categories, it may not have been something that the spouses were both entitled to share. The basic rule of thumb was this: an asset was a family asset if it was ordinarily used or was intended to be ordinarily used for a family purpose.
Cohabitation agreements and marriage agreements[edit]
Cohabitation agreements are agreements signed by people who will be or are living together, who may or may not wind up getting married later on down the road. Marriage agreements are signed by people who will be getting, or are, married. Although there's no reason why these agreements can't be signed well into a relationship, they're usually signed on or shortly after the date the parties begin to live together or marry.
These agreements are often used to say how property and debt will be handled during a relationship and how it will be allocated if the couple separates. Under section 93(1) of the Family Law Act, they must be in writing and be signed by each spouse in the presence of at least one other person as a witness. It is highly recommended that you both obtain independent legal advice from a lawyer (do not use the same lawyer, each must have a separate lawyer) before signing such an agreement to ensure that each party fully understands the nature and circumstances of the agreement and what is being given up.
However, since many people are content with the basic plan for the division of property set out in the Family Law Act, the question is often about what a cohabitation agreement or a marriage agreement can do that would be better than the division the act expects. Here are some ideas. An agreement could:
clarify which property is excluded property and what its value was when the relationship began,
allow a spouse to keep not just their excluded property but the growth in value of their excluded property,
say that there will be no shared family property, except for property that is registered in both spouses' names or that the parties agree in writing will be shared family property,
give a share of a spouse's excluded property to the other spouse, including a share which increases over time,
make all excluded property shareable family property,
say how property bought during the relationship will be owned if it's bought with both spouse's excluded property, or
say what will happen if a spouse's excluded property decreases in value during the relationship.
I'm sure there are other options as well.
A form of property co-ownership in which each joint tenant has a right of ownership of the whole property that is indistinct from the ownership rights of the other joint tenants. See "tenancy in common."
A person who holds property in trust for the benefit of another person. See "trust."
In law, response to an allegation of fact or to a claim. Usually refers to documents which reply to the allegations or claims made by the other party, such as a "Response to Family Claim" or a "Reply."
A person who gives something as a gift or as a bequest, freely and without expectation of payment in return.
Retrieved from "https://wiki.clicklaw.bc.ca/index.php?title=Basic_Principles_of_Property_%26_Debt_in_Family_Law&oldid=44438"