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How Do I Get Out of Sharing My Assets?

2019-05-14T21:46:37Z

Helen Chiu:

{{JP Boyd on Family Law How Do I TOC|expanded=obligation}}

==Married spouses and unmarried spouses==

Married spouses and unmarried couples who have lived together for at least two years are presumed to have a one-half interest in all property either or both of them acquired after the date the couple married or began to live together, whichever came first. Certain property is excluded from the family property the spouses are expected to divide, including:

*the value of the property owned by each spouse on the date the couple married or began to live together, whichever came first,
*property bought with the property owned by each spouse on the date the couple married or began to live together,
*inheritances and gifts (provided that the gift was to the spouse only and not to the couple) received during the relationship,
*court awards and insurance proceeds received during the relationship, and
*trusts to which the spouse did not contribute and does not control.

If you want to do better than this, you'll have to sign a marriage agreement or a cohabitation agreement at some point before or shortly after you marry or begin to live together.

If you don't want to spend the money getting an agreement drawn up, here are some other things that can help:

*When you begin to live together, take copies of the statements from all of your bank, investment, retirement, credit and loan accounts, copies of your BC Assessments for all real property, staple them together and put them in a safety deposit box. This will help you to establish the value of the property you brought into the relationship.
*During your relationship, keep a careful record of what you buy with the property you brought into the relationship.
*During your relationship, keep records of the dates and values of any inheritances, gifts, insurance proceeds or court award that you receive.
*If you received a gift during the relationship, keep documents evidencing the intention of the donor (i.e. a letter, note or electronic communication from the donor stating that the funds were a gift only to this particular person/spouse and not a gift to the couple, especially if the funds are subsequently used to purchase family property),
*Keep an eye on the debts your spouse incurs during the relationship.

You can find out more about how married spouses and unmarried spouses divide property in the chapter [[Property & Debt in Family Law Matters]].

{{REVIEWED | reviewer = [[Helen Chiu]], May 14, 2019}}

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Protecting Property and Debt in Family Law Matters

2019-05-14T21:42:14Z

Helen Chiu:

Dividing Property and Debt in Family Law Matters

2019-05-14T21:26:44Z

Helen Chiu:

{{JP Boyd on Family Law TOC|expanded = assets}}{{JPBOFL Editor Badge
|ChapterEditors = [[Helen Chiu]] and [[Matthew Ostrow]]
}}{{LSSbadge
| resourcetype = a fact sheet on
| link = [http://www.clicklaw.bc.ca/resource/1639 How to divide property and debts]
}}If a couple are able to agree on how their property and debts will be divided, they can make a separation agreement summarizing the terms of their settlement. However, if they can't agree, one or either of them will likely start court proceedings and the court will make an order dividing their property and debt for them.

This section talks about how property and debt are divided between spouses by the court through court orders made under the ''[[Family Law Act]]'', and by spouses through separation agreements. It also discusses when excluded property can be shared between spouses, when family property can be divided unequally, and when the court can make orders about property located outside British Columbia.

==Introduction==

Whether you're able to settle how property and debt are going to be shared by agreement, or if you're going to need a court order, it's important to understand how the ''[[Family Law Act]]'' works. If you're going to start a court proceeding, the court will be required to divide property using the rules set out in the Act; if you're going to be able to settle your property issues, the Act will be used to measure the fairness of your agreement if either of you ever tries to get out of the agreement in the future.

===How the ''Family Law Act'' divides property and debt===

Part 5 of the ''[[Family Law Act]]'' talks about the division of family property and family debt between spouses. It says what counts as shared family property and shared family debt, and which property is excluded from family property and is supposed to remain the separate property of the owner. It talks about when family property and family debt can be divided unequally, and the circumstances in which excluded property may be shared between spouses. Part 6 talks about how pensions, which count as family property under Part 5, get divided between spouses.

This is how Part 5 works:

*'''Section 97(2)(a):''' This section says that the court can make declarations concerning the possession and ownership of property and can make orders that may be necessary to give effect to such declarations.
*'''Section 106:''' This section says when the courts of British Columbia have the authority to divide property and debt if there is another court that can also make orders dividing property and debt between the same spouses.
*'''Section 81:''' This section states the basic principle that when spouses separate, each spouse takes a one-half interest in family property as a tenant in common, and each becomes responsible for one-half of the family debt.
*'''Sections 84 and 85:''' These sections tell you how to figure out which property is family property and which property is excluded property.
*'''Section 94(1):''' This section gives the court the authority to make orders for the division of property and debt between spouses.
*'''Sections 95 and 95:''' These sections say when the court may divide excluded property between spouses and when it may divide family property unequally.
*'''Section 109(1):''' This section allows the court to make orders for the ownership and division of property outside of British Columbia.

Interestingly, there isn't a section that explicitly says "the court should make orders dividing family property and family debt equally"; you have to figure this out from s. 81, which says that each spouse should have half of the family property and family debt, and from s. 94, which says that the court can make orders dividing family property and family debt.

===Dividing property and debt under the ''Family Law Act''===

Here's a step-by-step guide to Part 5. The discussions that follow will go into things in more detail.

'''Step One'''

<blockquote>To divide property and debt under the ''Family Law Act'', you first have to figure out whether you're a "spouse" as defined by s. 3(1)(a) or 3(1)(b)(i). You must either be married or have lived with your partner in a marriage-like relationship for at least two years.</blockquote>

If you're not a spouse, ''stop'' and read the discussion in the introductory section of this chapter, [[Property & Debt in Family Law Matters#Property claims and people who aren't spouses|Property & Debt]], about the property rights of people who aren't spouses. People who don't qualify as spouses are entitled to share in property that they both own, and may have an interest in property only one of them owns under the common law relating to trusts and equity.

'''Step Two'''

<blockquote>Next you need to look at any ''cohabitation agreement'' or ''marriage agreement'' that you may have signed earlier in your relationship to see whether it talks about property or debt.</blockquote>

If you have an agreement about property, ''stop''. Section 94(2) says that you cannot apply for a division of property if there's a written agreement about property or debt until that agreement is set aside. Accordingly, if you have an agreement about property that you want to vary or set aside, you must seek an order for the court.

'''Step Three'''

<blockquote>Next you have to check that you're making your claim within the ''time limits'' set out in s. 198(2). Married spouses must bring their claims for the division of property and debt within two years of the date of their divorce or a declaration that their marriage is a nullity; unmarried spouses must bring their claims within two years of the date of their separation.</blockquote>

If you're outside the time limits, ''stop''. Talk to a lawyer to confirm that you're out of time and ask about whether you're within the limitation period to ask for an interest in property under the common law relating to trusts and equity.

'''Step Four'''

<blockquote>Now you have to figure out whether there's ''another court'' somewhere outside of British Columbia that has the authority to make an order affecting you, your spouse, and your property. Most of the time the answer to this question will be no.

However, if:</blockquote>

::*you and your spouse lived somewhere else for a long time,
::*there is a court action commenced in another jurisdiction seeking the same or similar relief,
::*you have property outside of the province, or
::*you have a cohabitation agreement or a marriage agreement that requires the laws and courts of another place to be used,

<blockquote>there may be a problem. If another court can make an order, you then have to figure out under s. 106 whether the courts of British Columbia should be dealing with your proceeding at all.</blockquote>

If your case is better dealt with by another court, ''stop'' because you'll need to start a court proceeding there. If not, you can continue here.

'''Step Five'''

<blockquote>Now you have to start sorting what you have into ''family property'' and ''family debt'', and ''excluded property'' and ''personal debt''. Start from the assumption that everything you have is family property and family debt and then work backwards.</blockquote>

<blockquote>Property and debt that you got ''after you separated'' is generally the separate property or separate obligation of each spouse, with two main exceptions:</blockquote>

::*property bought after separation with family property is also family property (i.e. if the source of the funds used to buy the property can be traced back to family property) , and
::*debt incurred after separation to maintain family property is family debt.

<blockquote>Property you got ''during your relationship'' is generally family property, except for certain kinds of property that are excluded from family property. These include:</blockquote>

::*inheritances,
::*gifts from a third party, unless they are gifts to both spouses,
::*certain court awards,
::*certain insurance payments,
::*certain trust property, and
::*excluded property which is then gifted by one spouse to the other.

<blockquote>Property that you got ''before your relationship'' is generally excluded property that only you will keep, unless you have gifted it to your spouse. The increase in the value of the property you brought into the relationship is ''family property'' even where the original amount remains excluded. You will likely remain responsible for debt you brought into the relationship.</blockquote>

'''Step Six'''

<blockquote>Next you need to figure out what everything is worth and where it is. This will be the hard part.</blockquote>

<blockquote>For ''excluded property'' and ''personal debt'', what you need to know is:</blockquote>

::*What was the value of each asset on the date immediately before you began to live together or got married, whichever came first?
::*For property acquired during the relationship, when did you acquire each asset and what was it worth when you received it?
::*Was it a gift to you or you and your spouse together?
::*What did you do with your property during your relationship? Is it still around? Did you sell it and buy something else?
::*Did you gift it to your spouse?
::*Do you still have any debts from before your relationship started? If so, how much did you owe on the date you began to live together or got married, whichever was first?
::*Have you incurred any new debt after the date of your separation? Did you add to any debts incurred during your relationship after separation? If so, how much new debt have you racked up?

<blockquote>For ''family property'' and ''family debt'', you need to know:</blockquote>

::*What is the value of each asset now?
::*Did you buy any family property using the proceeds of sale of excluded property? If so, how much did you put toward the purchase of the family property?
::*Is there any property that was bought after separation with family property? If so, what is the value of those assets?
::*What are the debts owed by you, by your spouse, or by both of you, and how much is owing now?
::*If new debt was incurred after the date of separation, was any of it incurred to pay for family property? It so, how much new debt was spent on family property?

'''Step Seven'''

<blockquote>Now that you've got the numbers worked out, you may want to think about whether an ''equal division'' of family property and family debt would be "significantly unfair," bearing in mind the factors listed in s. 95(2), which includes but is not limited to the duration of relationship and whether a spouse, after the date of separation, caused a significant decrease or increase in the value of the family property or family debt beyond market forces. If it wouldn't be significantly unfair, then split the family property and family debt equally and go on with your life. If it would be significantly unfair, then you've got to figure out what a fair split looks like and I wish you the best of luck sorting this out in a speedy manner.</blockquote>

<blockquote>Finally, you may also want to think about whether there's a reason to share in some or all of the ''excluded property''. Excluded property can be divided if there's property outside of British Columbia that ought to be family property but can't easily be divided, or if it would be "significantly unfair" not to share excluded property, bearing in mind the factors listed in s. 96(b). If there's no reason to share excluded property, carry on. If it there is a reason to share that property, then you've got to figure out what a fair division looks like.</blockquote>

==Orders for the division of property and debt==

Under the ''[[Family Law Act]]'', a person who is a "spouse" under s. 3 may apply, within the two-year time limit in s. 198, for a division of property under s. 94(1). Where another court may also make an order for the division of property, the court here must first determine whether it should go ahead under s. 106 and, if so, it must next determine what law it should apply under s. 108. However, where no other court may make an order respecting property, the court here may make orders dividing property and debt under Part 5 of the act without any more complications.

The usual order under Part 5 is an order that decides which property is family property and which debt is family debt, and then divides them both equally. However, in some circumstances the court can divide family property and family debt unequally; in others the court can even divide excluded property between spouses.

===Determining jurisdiction===

A person who qualifies as a spouse under s. 3 of the ''[[Family Law Act]]'' can start a court proceeding in British Columbia and ask for orders about the division of property and debt. There's no rule that says that a person who starts a court proceeding in British Columbia must live in British Columbia, but there must be some sort of connection with this province and the court proceeding. Maybe the other spouse lives here. Maybe the property or debt is here. Maybe British Columbia is where the spouses lived for most of their relationship. Either way, there must be some connection between the court proceeding and British Columbia.

However, where another court might be able to make orders about the same people and the same property, the court here must decide:

#if it should make orders dividing property and debt or leave those issues for the other court, and
#if it should make orders, the law it should apply in dividing the property and debt.

====Determining whether the court should make orders====

''You should skip this discussion if no court other than the court of British Columbia can make orders about you, your spouse, and your property.''

When another court might be able to make orders about the same people and the same property, s. 106(2) provides the rules to help the court here determine when it may make orders dividing that property between those people under Part 5:

<blockquote><tt>(2) Despite any other provision of this Part, the Supreme Court has authority to make an order under this Part only if one of the following conditions is met:</tt></blockquote>
<blockquote><blockquote><tt>(a) a spouse has started another proceeding in the Supreme Court, to which a proceeding under this Part is a counterclaim;</tt></blockquote></blockquote>
<blockquote><blockquote><tt>(b) both spouses submit, either in an agreement or during the proceeding, to the Supreme Court's jurisdiction under this Part;</tt></blockquote></blockquote>
<blockquote><blockquote><tt>(c) either spouse is habitually resident in British Columbia at the time a proceeding under this Part is started;</tt></blockquote></blockquote>
<blockquote><blockquote><tt>(d) there is a real and substantial connection between British Columbia and the facts on which the proceeding under this Part is based.</tt></blockquote></blockquote>

In other words, the court here can make an order if:

#the claim about property was made by a counterclaim in the court proceeding,
#both spouses agree that the court should make orders about property and debt,
#either spouse normally lived here when the proceeding started, or
#there is a "real and substantial connection" between this province and the proceeding.

Section 106(3) helps to explain what "real and substantial connection" means:

<blockquote><tt>(3) For the purposes of subsection (2) (d), a real and substantial connection is presumed to exist if one or more of the following apply:</tt></blockquote>
<blockquote><blockquote><tt>(a) property that is the subject of the proceeding is located in British Columbia;</tt></blockquote></blockquote>
<blockquote><blockquote><tt>(b) the most recent common habitual residence of the spouses was in British Columbia;</tt></blockquote></blockquote>
<blockquote><blockquote><tt>(c) a notice of family claim with respect to the spouses has been issued under the ''Divorce Act'' (Canada) in British Columbia.</tt></blockquote></blockquote>

In other words, there is a "real and substantial connection" between this province and a court proceeding, which may let the court here make orders about the division of property and debt, if:

#the property is here,
#the spouses last lived together here, or
#the court proceeding includes a claim under the ''[[Divorce Act]]'' (the reason for this factor is that the ''Divorce Act'' requires a spouse to have lived in the province where they make a claim under the act for at least one year before the court proceeding is started).

As if this wasn't complicated enough, even if the court can make an order because one of the s. 106(2) conditions are met, under s. 106(4) the court can refuse to make orders for the division of property and debt. Section 106(5) says what the court must take into account in deciding to refuse to make orders:

<blockquote><tt>(5) In determining whether to decline jurisdiction under subsection (4), the court must consider all of the following:</tt></blockquote>
<blockquote><blockquote><tt>(b) the relative convenience and expense for the spouses and their witnesses;</tt></blockquote></blockquote>
<blockquote><blockquote><tt>(c) if section 108 [choice of law rules] applies, the law to be applied to issues in the proceeding;</tt></blockquote></blockquote>
<blockquote><blockquote><tt>(d) the desirability of avoiding multiple proceedings or conflicting decisions in different courts or tribunals;</tt></blockquote></blockquote>
<blockquote><blockquote><tt>(e) the extent to which an order respecting property or debt</tt></blockquote></blockquote>
<blockquote><blockquote><blockquote><tt>(i) made in another jurisdiction would be enforceable in British Columbia, and</tt></blockquote></blockquote></blockquote>
<blockquote><blockquote><blockquote><tt>(ii) made in British Columbia would be enforceable in another jurisdiction;</tt></blockquote></blockquote></blockquote>
<blockquote><blockquote><tt>(f) the fair and efficient working of the Canadian legal system as a whole;</tt></blockquote></blockquote>
<blockquote><blockquote><tt>(g) any other circumstances the court considers relevant.</tt></blockquote></blockquote>

This is a little harder to boil down, but these factors essentially ask the court to think about what is cheapest, fastest and fairest for the spouses and will require the least number of court proceedings.

====Determining the law to apply when the court may make orders====

''You should skip this discussion if no court other than the court of British Columbia can make orders about you, your spouse, and your property.''

Assuming, then, that the court here has decided that it has the authority to make orders for the division of property and debt because one of the s. 106(2) factors is met, and that it hasn't decided to refuse to make orders anyway under s. 106(4), the next thing to figure out is the law that the court should use in deciding how the property and debt should be divided under ss. 107 and 108. That law could be the law of British Columbia, namely Part 5 of the ''[[Family Law Act]]'', or it could be the law of another place.

Section 108 is just as complicated as s. 106, but what it all comes down to is this:

#under s. 108(3), if the spouses have an agreement that says the law of a particular place must be used, the law the court must use is the law of that particular place,
#under s. 108(4), if the spouses first together lived in a place that divides property like the ''[[Family Law Act]]'' divides property, the law the court must use is the law of the place where the spouses first lived together,
#under s. 108(5), if neither of the first two circumstances apply, the law the court must use is the "applicable internal law."

Section 107 says how you figure out what the "applicable internal law" is:

<blockquote><tt>The applicable internal law for the purposes of section 108 [choice of law rules] is</tt></blockquote>
<blockquote><blockquote><tt>(a) the internal law of the jurisdiction in which the spouses had their most recent common habitual residence,</tt></blockquote></blockquote>
<blockquote><blockquote><tt>(b) if the jurisdiction under paragraph (a) is outside Canada and is not the jurisdiction most closely associated with the relationship between the spouses, the internal law of the jurisdiction that is most closely associated with the relationship between the spouses, or</tt></blockquote></blockquote>
<blockquote><blockquote><tt>(c) if the spouses did not have a common habitual residence, the internal law of the jurisdiction in which the spouse making an application for an order under this Part was most recently habitually resident.</tt></blockquote></blockquote>

In other words, the "applicable internal law" that should be used to divide property and debt between spouses is:

#the law of the place where the spouses most recently lived together,
#the law of the place where the spouses lived together the longest, or
#if the spouses never lived together, the law of the place where the spouse making the claim for the division of property normally lives.

In the right circumstances, the "applicable internal law" could be the ''[[Family Law Act]]''!

===Property and debt inside British Columbia===

Section 97 is the key to Part 5 of the ''[[Family Law Act]]'' and gives the court its general power to make orders about the division of property and debt. Under this section, the court may:

#make decisions about any issue concerning the ownership, possession, or division of property or debt,
#make any order necessary to divide property or debt,
#declare who should own or possess property,
#make a spouse pay compensation if or she has sold or transferred property that should have been shared,
#require the sale of a property and payment to the spouses from the proceeds of the sale,
#make one spouse be responsible for debt,
#require the sale of property to pay debt, and
#make orders transferring property to a spouse.

Under s. 97, the court can make whatever orders are needed to equally divide family property and family debt between spouses, whatever extra orders are needed to divide family property and family debt unequally under s. 95, and whatever extra orders are needed to divide excluded property under s. 96.

====Interim orders====

An ''interim order'' is a temporary order made after a court proceeding has started and before it has wrapped up with a trial or a settlement. Under s. 88, a spouse can apply to court for an interim order about property at any time until a final order or a final agreement has been made about the division of property and debt.

=====Paying for dispute resolution processes=====

Under s. 89, the court can make an order for the interim distribution of some of the family property to a party to pay for:

#the cost (i.e. legal fees) of the court proceeding,
#the cost of another dispute resolution process, like mediation, arbitration, and collaborative settlement processes, and
#the cost of expert's reports, like needs of the child assessments under s. 211, property appraisals, or business valuation.

In practice, the court will usually make an order for an interim distribution for legal fees if the court feels it is necessary to "level the playing field" between spouses. By making such an order, the court tries to ensure that the spouse who has all the money and can afford a lawyer does not have an advantage over the spouse who does not have as much money and may not be able to afford to pay for a lawyer without an interim distribution for legal fees.

=====Use of property=====

Under s. 90, the court can make an interim order that one spouse have the exclusive right to live in the family home and use the property (i.e. household contents and furnishings) kept at the family home. The court will make these orders if it's no longer possible for the spouses to share the home and if the convenience to the spouse who's staying in the home outweighs the inconvenience to the spouse who's being made to leave. Usually, if there are children (especially young children), the spouse who has primary care of the children will be the spouse who remains in the family home because the children require stability and security of remaining in the family home.

Under s. 91(2)(a), the court can make other interim orders "for the possession, delivery, safekeeping and preservation of property." This might include orders that a spouse must return personal property to the other spouse or that a spouse will have the sole use of personal property, like a car that's necessary to go to work or take the kids to school.

=====Financial restraining orders=====

Under s. 91(1) and (2), the court can make some really important interim orders that are intended to freeze any property that is at issue in the court proceeding, including family property and property that might be excluded property, until the property is finally divided by an order or an agreement.

<blockquote><tt>(1) On application by a spouse, the Supreme Court must make an order restraining the other spouse from disposing of any property at issue under this Part or Part 6 [Pension Division] until or unless the other spouse establishes that a claim made under this Part or Part 6 will not be defeated or adversely affected by the disposal of the property.</tt></blockquote>
<blockquote><tt>(2) The Supreme Court may make one or more of the following orders:</tt></blockquote>
<blockquote><blockquote><tt>(b) for the purpose of protecting the applicant's interest in property from being defeated or adversely affected,</tt></blockquote></blockquote>
<blockquote><blockquote><blockquote><tt>(i) prohibiting the other spouse from disposing of, transferring, converting, or exchanging into another form, property in which the applicant may have an interest, or</tt></blockquote></blockquote></blockquote>
<blockquote><blockquote><blockquote><tt>(ii) vesting all or a portion of property in, or in trust for, the applicant.</tt></blockquote></blockquote></blockquote>

A couple of important points about this section deserve mention:

*the order ''must'' be made when a spouse asks for it, unless the other spouse can show that there are sufficient assets so that the claim to the property won't be frustrated if they happen to sell some of the assets,
*the order can be made without giving the other spouse notice of the application, and
*the order includes not just "family property" but all property in dispute, including property that might be excluded property.

This is a powerful interim order and you should probably think about asking for this order if you are asking for a share of property. This is just a matter of being prudent. You may have no cause to believe that your spouse would do something that would jeopardize your interests, but it almost always pays to be cautious.

Rule 12-4 of the Supreme Court Family Rules gives the court the authority to make a general restraining order, called an ''injunction'', to require someone to do something or not do something. The same authority is given to the court by s. 39 of the provincial ''[http://canlii.ca/t/8459 Law and Equity Act]''. See this chapter's section on [[Protecting Property & Debt in Family Law Matters|Protecting Propery & Debt]] for more information.

====Dividing property and debt equally====

Under s. 81(a) of the ''[[Family Law Act]]'', "spouses are both entitled to family property and responsible for family debt, regardless of their respective use or contribution." Under s. 81(b), each spouse's share of the family property is presumed to be an "undivided half interest" and each spouse is "equally responsible for family debt." Section 97 gives the court the ability to make whatever orders are necessary to divide family property and family debt between spouses.

Section 84 says what family property is:

<blockquote><tt>(1) Subject to section 85 [excluded property], family property is all real property and personal property as follows:</tt></blockquote>
<blockquote><blockquote><tt>(a) on the date the spouses separate, </tt></blockquote></blockquote>
<blockquote><blockquote><blockquote><tt>(i) property that is owned by at least one spouse, or</tt></blockquote></blockquote></blockquote>
<blockquote><blockquote><blockquote><tt>(ii) a beneficial interest of at least one spouse in property;</tt></blockquote></blockquote></blockquote>
<blockquote><blockquote><tt>(b) after separation,</tt></blockquote></blockquote>
<blockquote><blockquote><blockquote><tt>(i) property acquired by at least one spouse if the property is derived from property referred to in paragraph (a) (i) or from a beneficial interest referred to in paragraph (a) (ii), or from the disposition of either, or</tt></blockquote></blockquote></blockquote>
<blockquote><blockquote><blockquote><tt>(ii) a beneficial interest acquired by at least one spouse in property if the beneficial interest is derived from property referred to in paragraph (a) (i) or from a beneficial interest referred to in paragraph (a) (ii), or from the disposition of either.</tt></blockquote></blockquote></blockquote>
<blockquote><tt>(2) Without limiting subsection (1), family property includes the following:</tt></blockquote>
<blockquote><blockquote><tt>(a) a share or an interest in a corporation;</tt></blockquote></blockquote>
<blockquote><blockquote><tt>(b) an interest in a partnership, an association, an organization, a business or a venture;</tt></blockquote></blockquote>
<blockquote><blockquote><tt>(c) property owing to a spouse</tt></blockquote></blockquote>
<blockquote><blockquote><blockquote><tt>(i) as a refund, including an income tax refund, or</tt></blockquote></blockquote></blockquote>
<blockquote><blockquote><blockquote><tt>(ii) in return for the provision of a good or service;</tt></blockquote></blockquote></blockquote>
<blockquote><blockquote><tt>(d) money of a spouse in an account with a financial institution;</tt></blockquote></blockquote>
<blockquote><blockquote><tt>(e) a spouse's entitlement under an annuity, a pension, a retirement savings plan or an income plan;</tt></blockquote></blockquote>
<blockquote><blockquote><tt>(f) property, other than property to which subsection (3) applies, that a spouse disposes of after the relationship between the spouses began, but over which the spouse retains authority, to be exercised alone or with another person, to require its return or to direct its use or further disposition in any way;</tt></blockquote></blockquote>
<blockquote><blockquote><tt>(g) the amount by which the value of excluded property has increased since the later of the date</tt></blockquote></blockquote>
<blockquote><blockquote><blockquote><tt>(i) the relationship between the spouses began, or</tt></blockquote></blockquote></blockquote>
<blockquote><blockquote><blockquote><tt>(ii) the excluded property was acquired.</tt></blockquote></blockquote></blockquote>

Section 86 says what family debt is:

<blockquote><tt>Family debt includes all financial obligations incurred by a spouse</tt></blockquote>
<blockquote><blockquote><tt>(a) during the period beginning when the relationship between the spouses begins and ending when the spouses separate, and</tt></blockquote></blockquote>
<blockquote><blockquote><tt>(b) after the date of separation, if incurred for the purpose of maintaining family property.</tt></blockquote></blockquote>

====Dividing property and debt unequally====

Under s. 95(1) of the ''[[Family Law Act]]'', the court may divide family property or family debt unequally, but only if equal division would be "significantly unfair"in the context of the factors mentioned in s. 95(2). Recent court decisions explain that the unfairness must be "weighty, meaningful or compelling." A judge can only order an unequal division of family property where the result of equal division would be so unfair as to be unjust or unreasonable. It is highly unlikely that a court would find the circumstances to be "significantly unfair" merely because one spouse worked during the marriage and the other spouse did not. 

Section 95(2) provides a list of factors considered when deciding if equal division of property and debt is significantly unfair:

<blockquote><tt>(2) For the purposes of subsection (1), the Supreme Court may consider one or more of the following:</tt></blockquote>
<blockquote><blockquote><tt>(a) the duration of the relationship between the spouses;</tt></blockquote></blockquote>
<blockquote><blockquote><tt>(b) the terms of any agreement between the spouses, other than an agreement described in section 93 (1) [setting aside agreements respecting property division];</tt></blockquote></blockquote>
<blockquote><blockquote><tt>(c) a spouse's contribution to the career or career potential of the other spouse;</tt></blockquote></blockquote>
<blockquote><blockquote><tt>(d) whether family debt was incurred in the normal course of the relationship between the spouses;</tt></blockquote></blockquote>
<blockquote><blockquote><tt>(e) if the amount of family debt exceeds the value of family property, the ability of each spouse to pay a share of the family debt;</tt></blockquote></blockquote>
<blockquote><blockquote><tt>(f) whether a spouse, after the date of separation, caused a significant decrease or increase in the value of family property or family debt beyond market trends;</tt></blockquote></blockquote>
<blockquote><blockquote><tt>(g) the fact that a spouse, other than a spouse acting in good faith,</tt></blockquote></blockquote>
<blockquote><blockquote><blockquote><tt>(i) substantially reduced the value of family property, or</tt></blockquote></blockquote></blockquote>
<blockquote><blockquote><blockquote><tt>(ii) disposed of, transferred or converted property that is or would have been family property, or exchanged property that is or would have been family property into another form, causing the other spouse's interest in the property or family property to be defeated or adversely affected;</tt></blockquote></blockquote></blockquote>
<blockquote><blockquote><tt>(h) a tax liability that may be incurred by a spouse as a result of a transfer or sale of property or as a result of an order;</tt></blockquote></blockquote>
<blockquote><blockquote><tt>(i) any other factor, other than the consideration referred to in subsection (3), that may lead to significant unfairness.</tt></blockquote></blockquote>

In some cases judges find that the ''unequal contribution'' of one person, along with other factors, warrants unequal division. In other cases, ''unequal contribution'' is not enough to establish "significant unfairness."

Under s. 95(3), the court can also take into account issues relating to spousal support in deciding whether to divide family property and family debt unequally:

<blockquote><tt>(3) The Supreme Court may consider also the extent to which the financial means and earning capacity of a spouse have been affected by the responsibilities and other circumstances of the relationship between the spouses if, on making a determination respecting spousal support, the objectives of spousal support under section 161 [objectives of spousal support] have not been met.</tt></blockquote>

This provision will apply when there is an obvious need for spousal support to be paid, but the potential payor doesn't have the surplus income from which to pay. In this situation, the spouse in need of support might get more of the family property to make up for the support that can't be paid. See the chapter on [[Spousal Support]] for more information about when spousal support might be payable.

====Dividing excluded property====

Under s. 96 of the ''[[Family Law Act]]'', the court may not make an order dividing excluded property between spouses except in two situations: if there's property outside the province that can't be divided under s. 109, discussed below; or, if it would be "significantly unfair" not to divide the excluded property in light of the length of the spouses' relationship or one spouse's contributions to the excluded property owned by the other spouse. Section 96 says this:

<blockquote><tt>The Supreme Court must not order a division of excluded property unless</tt></blockquote>
<blockquote><tt>(a) family property or family debt located outside British Columbia cannot practically be divided, or</tt></blockquote>
<blockquote><tt>(b) it would be significantly unfair not to divide excluded property on consideration of</tt></blockquote>
<blockquote><blockquote><tt>(i) the duration of the relationship between the spouses, and</tt></blockquote></blockquote>
<blockquote><blockquote><tt>(ii) a spouse's direct contribution to the preservation, maintenance, improvement, operation or management of excluded property.</tt></blockquote></blockquote>

As we saw in the discussion about s. 95, it's hard to say what "significantly unfair" means. I expect that something that is "significantly unfair" is more unfair than something which is just "unfair," yet is less unfair than something that is "grossly unfair."

===Property and debt outside British Columbia===

Division 6 of Part 5 of the ''[[Family Law Act]]'' has a complicated test that the court must apply to determine whether it can and should make orders dividing property and debt between spouses when another court could also make orders about the same people and the same property. This was discussed earlier in this section under the heading "Determining jurisdiction."

If the court decides that it can make orders, it can, in certain circumstances, also make orders about property located outside the province under s 109(2):

<blockquote><tt>(2) For the purposes of dividing extraprovincial property, the Supreme Court, on application by a spouse, may make an order to do one or more of the following:</tt></blockquote>
<blockquote><blockquote><tt>(a) instead of dividing the extraprovincial property,</tt></blockquote></blockquote>
<blockquote><blockquote><blockquote><tt>(i) require property or family debt within British Columbia to be substituted for rights in the extraprovincial property, or</tt></blockquote></blockquote></blockquote>
<blockquote><blockquote><blockquote><tt>(ii) require a spouse who has legal title to the extraprovincial property to pay compensation to the other spouse;</tt></blockquote></blockquote></blockquote>
<blockquote><blockquote><tt>(b) if the court is satisfied that it would be enforceable against a spouse in the jurisdiction in which the extraprovincial property is located,</tt></blockquote></blockquote>
<blockquote><blockquote><blockquote><tt>(i) preserve the extraprovincial property,</tt></blockquote></blockquote></blockquote>
<blockquote><blockquote><blockquote><tt>(ii) provide for the possession of the extraprovincial property,</tt></blockquote></blockquote></blockquote>
<blockquote><blockquote><blockquote><tt>(iii) require a spouse who has legal title to the extraprovincial property to transfer all or part of the spouse's interest in the extraprovincial property to the other spouse, or</tt></blockquote></blockquote></blockquote>
<blockquote><blockquote><blockquote><tt>(iv) provide for any other matter in connection with the extraprovincial property;</tt></blockquote></blockquote></blockquote>
<blockquote><blockquote><tt>(c) if the court is satisfied that it would be enforceable in the jurisdiction in which the extraprovincial property is located, provide for non-monetary relief.</tt></blockquote></blockquote>

To put this another way:

#under s. 109(2)(a), the court can divide family property here unequally to compensate for property outside the province, just like how the court can divide excluded property for the same reason under s. 96(a),
#under s. 109(2)(b)(i), the court can make a kind of restraining order to stop the property outside the province from being sold, just like how the court can make restraining orders about property inside the province under s. 91(1), and
#under s. 109(2)(b)(ii) and (iii) and s. 109(3), the court can make orders about which spouse should be able to possess or own property outside the province and orders transferring property outside the province between spouses.

==Separation agreements for the division of property and debt==

A separation agreement is a contract that records a settlement of the issues that arise when a relationship ends. Separation agreements can be an effective and inexpensive way of settling things. However, the terms of the agreement must be reasonable, and the parties must be able to get along well enough to negotiate the deal and then put it into action it when it's done.

The ways that a separation agreement can deal with the division of family property and family debt are virtually unlimited. Under the ''[[Family Law Act]]'', each spouse is presumed to keep the property they brought into the relationship and share in the property bought during the relationship as well as the increase in the value of any property brought in. Although spouses are presumed to be each half responsible for any debt incurred during the relationship, you can make whatever other arrangements you want, as long as both spouses agree to those arrangements and they're reasonably fair. In fact, s. 92 says this:

<blockquote><tt>Despite any provision of this Part but subject to section 93 [setting aside agreements respecting property division], spouses may make agreements respecting the division of property and debt, including agreements to do one or more the following:</tt></blockquote>
<blockquote><blockquote><tt>(a) divide family property or family debt, or both, and do so equally or unequally;</tt></blockquote></blockquote>
<blockquote><blockquote><tt>(b) include as family property or family debt items of property or debt that would not otherwise be included;</tt></blockquote></blockquote>
<blockquote><blockquote><tt>(c) exclude as family property or family debt items of property or debt that would otherwise be included;</tt></blockquote></blockquote>
<blockquote><blockquote><tt>(d) value family property or family debt differently than it would be valued under section 87 [valuing family property and family debt].</tt></blockquote></blockquote>

In other words, in making an agreement about the division of property and debt, spouses can divide unequally the things they're supposed to divide equally, divide things they're not supposed to divide, and not divide things that are supposed to be divided. As long as you both agree, you can do pretty much whatever you want in a separation agreement.

===The effect of a valid agreement===

When spouses have written, signed and witnessed an agreement about the division of property and debt, s. 94(2) of the ''[[Family Law Act]]'' says that the court cannot make an order about the division of family property, excluded property, or family debt, unless the parts of the agreement that deal with property and debt are set aside by a court order. This gives agreements on the division of property and debt a lot more protection against later court challenges than was provided to agreements under the old ''[[Family Relations Act]]''.

===Making a valid agreement===

Under the ''[[Family Law Act]]'', an agreement about the division of property and debt may be oral or written. However, it is highly recommended that the agreement be in writing so that there is less chance of a dispute over the terms of the agreement.

There are requirements about the validity of agreements that are part of the common law of contracts. These are discussed in a little more detail further on in this section, but for a more thorough discussion you should look at the [[Family Law Agreements]] chapter.

It is also highly recommended that each spouse obtain independent legal advice (i.e. hiring a lawyer (separate lawyers) to explain and give advice about the terms of the agreement) before signing the agreement to ensure that each spouse understands the nature, circumstances, terms and the effect of the agreement, especially if one spouse has a limited understanding of the English language or has limited education.

It is also important to ensure that each spouse has properly and fully disclosed all assets and debts in the spouse's name in the agreement. An agreement that says "mine is mine and yours is yours" without proper disclosure may not be upheld by the court if one spouse seeks to set it aside or vary it.

===Asking the court to set aside an agreement===

Section 94(2) says that the court cannot make an order dividing property or debt in the face of a written and witnessed agreement on property and debt until it has set aside those parts of the agreement. As a result, if a spouse is unhappy with the terms of a separation agreement on property or debt, the spouse must first ask the court to set aside the agreement and second ask for an order about the division of property and debt.

====Family law agreements and contract law====

Family law agreements are private contracts reached between two people. While family law agreements can be attacked and enforced on the principles of contract law, the court will usually give considerable weight to family law agreements. Without proof of some serious problem like duress or coercion, or some other issue, the court will treat the agreement as representing the honest and informed intentions of the parties to settle their dispute.

Because of the importance the court will usually give to an agreement, it can sometimes be necessary to attack the agreement itself under the law that applies to contracts. An agreement might be found to be invalid for one or more of the following reasons:

*one of the parties was forced to enter into the agreement,
*one party was too much under the influence or control of the other party in consenting to the terms of the agreement,
*the agreement is fundamentally unfair, or
*one party lied to the other party or hid information from that party, and these misleading representations were the basis on which the other party signed the agreement.

All of these arguments are based on the law of contracts, not on a particular piece of legislation.

====Agreements on property and debt and the ''Family Law Act''====

The ''[[Family Law Act]]'' provides two tests to help the court decide when an agreement on property and debt should be set aside. Under the first test, at s. 93(3), the court must look at the situation of the parties when they were negotiating and executing the agreement. The court is required to consider whether these circumstances existed when the parties were making their agreement:

<blockquote><tt>(a) a spouse failed to disclose significant property or debts, or other information relevant to the negotiation of the agreement;</tt></blockquote>
<blockquote><tt>(b) a spouse took improper advantage of the other spouse's vulnerability, including the other party's ignorance, need or distress;</tt></blockquote>
<blockquote><tt>(c) a spouse did not understand the nature or consequences of the agreement;</tt></blockquote>
<blockquote><tt>(d) other circumstances that would under the common law cause all or part of a contract to be voidable.</tt></blockquote>

The last part of this test, at subsection (d), is about whether there is a defect under the law of contracts that might make the agreement void or voidable. The other parts of the test are all about the fairness of the parties' negotiations.

Now, even if there are problems with an agreement under s. 93(3), the court can still decide not to set aside the agreement if "it would not replace the agreement with an order that is substantially different from the terms set out in the agreement" under s. 93(4). In other words, if the court wouldn't make a different order than the arrangements the parties agreed to, it might just leave the agreement alone.

If there are no problems under s. 93(3), the second test, at s. 93(5), allows the court to set aside agreements that are "significantly unfair" taking into account:

<blockquote><tt>(a) the length of time that has passed since the agreement was made;</tt></blockquote>
<blockquote><tt>(b) the intention of the spouses, in making the agreement, to achieve certainty;</tt></blockquote>
<blockquote><tt>(c) the degree to which the spouses relied on the terms of the agreement;</tt></blockquote>

If the court sets aside an agreement under s. 93(3) or (5), the court will then make an order dividing property and debt between the spouses in place of the agreement.

==Resources and links==

===Legislation===

* ''[[Family Law Act]]''
* ''[http://canlii.ca/t/8459 Law and Equity Act]''
* ''[[Family Relations Act]]''

===Links===

* [http://www.clicklaw.bc.ca/resource/1240 Canadian Bar Association BC Branch: Dividing property and debts]
* [http://www.clicklaw.bc.ca/resource/1529 Justice Education Society: Workbook for parents separated with children on dealing with finances]
* [http://www.clicklaw.bc.ca/resource/1639 Legal Services Society’s Family Law Website: How to divide property and debts]

{{REVIEWED | reviewer = [[Helen Chiu]], May 14, 2019}}

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[[Category:JP Boyd on Family Law]]

Property and Debt in Family Law Matters

2019-05-14T20:53:17Z

Helen Chiu:

{{JPBOFL Start Chapter
|Related = [[Basic Principles of Property & Debt in Family Law|Basic Principles]]{{·}}[[Protecting Property & Debt in Family Law Matters|Protecting Property & Debt]]{{·}}[[Dividing Property & Debt in Family Law Matters|Dividing Property & Debt]]
}}
{{JP Boyd on Family Law TOC|expanded = assets}}{{JPBOFL Editor Badge
|ChapterEditors = [[Helen Chiu]] and [[Matthew Ostrow]]
}}
{{LSSbadge
| resourcetype = a fact sheet on
| link = [http://www.clicklaw.bc.ca/resource/1639 How to divide property and debts]
}}This chapter focuses on the division of property and debt between married spouses and unmarried spouses. Under the provincial ''[[Family Law Act]]'', spouses are presumed to keep the property that each of them brought into their relationship and to share in the things they acquired during their relationship. The same rules apply about debt. Spouses are presumed to share responsibility for the debts that accumulated during their relationship. The federal ''[[Divorce Act]]'' doesn't talk about the division of property or debt.

This introductory section provides basic information about property and debt. It also looks at the rules about property that apply to couples who are not spouses, and reviews some of the income tax issues that can come up when dividing property. The sections that follow will go into the rules about the [[Basic Principles of Property & Debt in Family Law|division of property and debt]] in a lot more detail, the steps that you can take to [[Protecting Property & Debt in Family Law Matters|protect family property]], and [[Dividing Property & Debt in Family Law Matters|how property and debt are divided]] by the court through court orders and by spouses through separation agreements.

==Dividing property and debt under the ''Family Law Act''==

The parts of the ''[[Family Law Act]]'' that talk about the division of property and debt apply to people who are ''spouses''. The definition of spouse for these parts of the act are a bit different from the rest of the act. For the division of property and debt, a spouse is:

#someone who is married or was married to someone else, or
#someone who is or was living in a "marriage-like relationship" with someone else for at least two years.

People who lived together for less than two years are ''not'' spouses for these parts of the ''[[Family Law Act]]'', whether they've had a child together or not.

Property and debt can be divided under the terms of a cohabitation agreement or a marriage agreement that the spouses made around the time they began to live together, or under the terms of a separation agreement that they made around the time they separated. If the spouses can't reach an agreement, a court can make an order about the division of property and debt.

Court proceedings for the division of property and debt must be started within two years of:

#the date of ''divorce'' or ''annulment'' for married spouses, or
#the date of ''separation'' for unmarried spouses.

===Family property, excluded property and family debt===

The ''[[Family Law Act]]'' talks about three things when it comes to dividing property and debt: ''family property'', ''excluded property'', and ''family debt''.

All property owned by either or both spouses (including property owned by a spouse jointly with a third party such as a parent) at the date of separation is ''family property'' unless it is ''excluded property''. Family property includes things like real property, bank accounts, pensions, business, debts owing to a spouse, and so forth. Family property is presumed to be shared equally between spouses, regardless of their use of or contribution to that property.

''Excluded property'' is any property that is excluded from the pool of family property to be split between spouses. This includes the property a spouse owned before the date of marriage or the date the spouses began living together, whichever is earlier, plus certain kinds of property acquired during the spouses' relationship, including:

*property that was bought with the property brought into the relationship,
*inheritances and gifts (provided that the gift is a gift to just the spouse and not to the couple), and
*certain kinds of insurance proceeds and court awards.

Excluded property is presumed to remain the property of the spouse who owns it, but the increase in value of the excluded property becomes family property and is shared.

All debt incurred by either or both spouses from the date of marriage or the date the spouses began living together, whichever is earlier, to the date of separation is ''family debt''. Responsibility for family debt is presumed to be shared equally between spouses, regardless of their use of or contribution to that debt.

===Beginning and ending a spousal relationship===

As you can see, certain dates in a couple's relationship are really important. The date a relationship begins ― the earlier of the date the spouses begin to live together or marry ― is the date that separates the excluded property brought into the relationship from the family property acquired during their relationship and is the date when spouses begin to share responsibility for new debts. The date the spouses separate, generally speaking, marks the end of the accumulation of shared property and shared debt.

====Living together and marrying====

Under s. 3(3) of the ''[[Family Law Act]]'', a relationship between spouses begins

<blockquote><tt>... on the earlier of the following:</tt></blockquote>
<blockquote><blockquote><tt>(a) the date on which they began to live together in a marriage-like relationship;</tt></blockquote></blockquote>
<blockquote><blockquote><tt>(b) the date of their marriage.</tt></blockquote></blockquote>

Since the definition of ''spouse'' at s. 3(1)(b)(i) includes people who have lived together "for a continuous period of at least 2 years," once you have reached the two-year mark:

#you and your partner are spouses, and
#your relationship as spouses began two years earlier, on the date you began to live together.

====Separating====

Although a married couple are married until they get a divorce, the key date for the division of property and debt under the ''[[Family Law Act]]'' is the date of separation. This date is important for both married spouses and unmarried spouses.

Although many people move out when they separate, some couples separate and remain living under the same roof. A physical separation is not necessary to separate; there must simply be an intention to end both the relationship and the intimacies that go along with it. Often the decision to separate is made by both spouses, but it only takes one spouse decide to end a relationship, and one spouse's decision to separate doesn't require the consent of the other spouse.

Section 3(4) of the act says this:

<blockquote><tt>(a) spouses may be separated despite continuing to live in the same residence, and</tt></blockquote>
<blockquote><tt>(b) the court may consider, as evidence of separation,</tt></blockquote>
<blockquote><blockquote><tt>(i) communication, by one spouse to the other spouse, of an intention to separate permanently, and</tt></blockquote></blockquote>
<blockquote><blockquote><tt>(ii) an action, taken by a spouse, that demonstrates the spouse's intention to separate permanently.</tt></blockquote></blockquote>

In other words, to separate, one spouse should announce the end of the relationship and then take steps that would demonstrate an intention to end the relationship. Separation is discussed in more detail in the chapter [[Separation & Divorce]], in the section [[Separation]].

===Property brought into the relationship===

Under s. 85(1)(a), property that was brought into a relationship is excluded from the pool of family property that is supposed to be divided equally between spouses. Under s. 96, the court "must not" order a division of excluded property, except in limited circumstances. A spouse is therefore normally entitled to keep the excluded property they owned when the relationship began. Under s. 85(2), however, it is up to the person who's saying that property is excluded property to prove that the property is excluded property.

For most couples, property brought into a relationship will form the largest component of a spouse's excluded property. However, when most people marry or move in together, counting up their assets is not the foremost thing on their mind. This means that you may wind up having to do some historical accounting to figure out what you each owned years ago. Whether you're just starting a relationship or are trying to figure out what you once had, these are the documents you need to look for:

*bank statements for the period that includes the date you began to live together or got married, whichever came first,
*RRSP, RIF, LIRA and other retirement savings account statements for the same period,
*any employee pension statements that cover the date you began to live together or got married,
*mutual fund and other investment account statements for that period,
*any BC Assessment statements for the year in which you began to live together or got married,
*mortgage and line of credit statements for the period that includes the date you began to live together or got married, and
*credit card and loan statements for that period.

It will be a harder to look back in time to figure out the value of things like cars, motorcycles, trailers, boats, snowmobiles and so on. If you're entering a relationship now, it will be helpful to look up the [http://www.canadianblackbook.com/ Canadian Black Book] or [http://www.kbb.com/ Kelley Blue Book] estimated values for vehicles. Boats and trailers may need to be specially valued by a dealer. It is important to note that you cannot exclude the ''value'' of the property calculated from the start of the relationship. For example, let's assume one party owned a car worth $20,000 at the beginning of the relationship. Say it is only worth $10,000 at the time of separation. That party gets to keep the car itself, but does not get $20,000 worth of property out of ''family property''. If the car was traded in towards the purchase of a second car during the relationship, however, the trade-in value would be ''excluded property''.

===Property and debt acquired during the relationship===

In most circumstances, the property either or both spouses acquire during their relationship will be family property, but there are some important exceptions.

====Family property====

Under s. 84(1) of the ''[[Family Law Act]]'', family property is the property owned by one or both spouses on the date of their separation, including any property bought after separation with family property. Section 84(2) give some examples of specific assets that are family property, including:

*interests in companies, businesses, partnerships and ventures,
*money owed to a spouse, and
*bank accounts, savings, pensions and RRSPs.

Family property also includes the amount that any excluded property grows in value after the date the spouses' relationship began or after the excluded property was acquired, whichever is later.

Under s. 81, family property is presumed to be shared between the spouses equally, regardless of their use or contribution to that property.

For information on how to share CPP credits see [[How Do I Divide Our CPP Pensions after We're Divorced?]] It's located in the ''How Do I?'' part of this resource in the ''Miscellaneous'' section.

====Excluded property====

The sort of excluded property that can be acquired during a relationship is described in s. 85(1), and includes:

*gifts from a third party (provided that the gift is a gift to the spouse and not to the couple),
*inheritances,
*certain court awards and settlements,
*certain insurance payments, and
*property held in trust, providing that the spouse didn't put the property into the trust.

Excluded property that is acquired during a relationship is presumed to remain the property of the spouse who owns it. However, under s. 85(2), it is up to the person who's saying that property is excluded property to prove that the property is excluded property.

====Family debt====

Under s. 86, family debt is all debt incurred by either or both spouses during their relationship up to the date of their separation, but can include debt incurred after separation if the debt was incurred to maintain family property, like a loan taken out to pay the property taxes.

This definition means that debt incurred by a spouse before the spouses married or began to live together is that spouse's personal debt; it's only the new debt that they share. Under s. 81, responsibility for family debt is presumed to be shared between the spouses equally, regardless of their use or contribution to that debt.

===Dividing property and debt: an example===

Let's look at an example to make things a bit easier to understand.

<blockquote>Harkamal moved in to live with Baljinder in his home in 2009, when Baljinder's home was worth $300,000; Baljinder has no mortgage.</blockquote>
<blockquote>Harkamal starts going to college in 2010 and because she's not working, she takes a personal loan to help pay for her tuition fees, lab fees and textbook costs. Baljinder keeps working while Harkamal is at school, and with his income, he pays for the property taxes, car insurance, utilities and groceries and so forth. He's also able to put some money away into RRSPs.</blockquote>
<blockquote>Harkamal and Baljinder separate in 2013. When they separate, Harkamal owes $12,000 for her personal loan, Baljinder's house is worth $400,000 and Baljinder has saved $30,000 in RRSPs.</blockquote>

In this example, Baljinder's house is his ''excluded property''. It was worth $300,000 when Harkamal began living with him, and it has increased in value by $100,000. The ''family property'' is the RRSPs that Baljinder saved, plus the increase in value of Baljinder's house during the relationship. The ''family debt'' is Harkamal's loan which was incurred entirely during the parties' relationship and is now up to $12,000.

Boiling this all down, subject to a claim for reapportionment, Baljinder would get:

*$300,000 as the value of the home he brought into the relationship,
*$50,000 for one-half of the growth in the value of his house to the date of separation,
*RRSPs worth $15,000, and
*responsibility for $6,000 of Harkamal's loan.

Harkamal would, subject to a claim for reapportionment, get:

*$50,000 for one-half of the growth in the value of Baljinder's house,
*RRSPs worth $15,000, and
*responsibility for the remaining $6,000 of her loan.

==Property claims and people who aren't spouses==

People are not spouses within the ''[[Family Law Act]]'' definition at s. 3, described above, cannot make a claim for the division of property or debt through that act. When people who aren't spouses own an asset jointly, like a house or a car, they are presumed to each be entitled to half of the value of that property. Where a person claims a share of property owned only by the other person, they will have to prove an entitlement to that asset through the principles of the common law.

===Jointly-owned assets===

Where a couple are both on the title of an asset, whether the family home, a car or a bank account, they are each assumed to have an equal interest in the asset. When one party refuses to give the other their share of that asset, it is open to that person to start a court proceeding for either:

#an order for the sale of the asset and the division of the proceeds of the sale, or
#an order for payment in compensation for their interest in the asset.

Where real property is jointly owned, it is possible to make a claim under the provincial ''[http://canlii.ca/t/848q Partition of Property Act]''. Section 2 of this act says that:

<blockquote><tt>(1) All joint tenants, tenants in common, coparceners, mortgagees or other creditors who have liens on, and all parties interested in any land may be compelled to partition or sell the land, or a part of it as provided in this Act.</tt></blockquote>
<blockquote><tt>(2) Subsection (1) applies whether the estate is legal or equitable or equitable only.
This act allows a co-owner, including someone with only an equitable interest in the property, potentially including an interest under the law of trusts as discussed below, to apply for an order that the property be sold and the proceeds of the sale divided.</tt></blockquote>

In other words, if you jointly own real property with your partner, you can apply to court for an order that the property be sold and the proceeds of the sale be split between you.

===Individually-owned assets===

Where a person who is not a spouse believes that they should have an interest in property owned only by the other person, a claim against that property can only be made under the common law, specifically the law of equity and the law of trusts.

The essential point of this sort of claim is that the non-owning party has, or should be considered to have, a stake in property owned by the other party. The non-owning party's interest in that property is said to be held ''in trust'' for the non-owning party by the person who owns the property on paper. The non-owning party is the beneficiary of that trust and should be entitled to receive compensation for their interest in the property under the trust.

There are three kinds of trust claim that may be made:

*a constructive trust,
*an express trust, and
*a resulting trust.

A ''resulting trust'' happens when the behaviour of the parties will let the court infer the existence of a trust relationship; an ''express trust'' is a trust relationship that people intentionally enter into; and, a ''constructive trust'' is imposed in order to compensate someone for their interest in property when the interest can't be paid out immediately. Resulting and constructive trusts are the most common kind of trusts involved in family law disputes about property.

Needless to say, this area of the law can be complex. If you find yourself in a situation where your only claim to an asset or a share of an asset is through trust law, it is recommended that you hire a lawyer to handle your claim.

====Resulting trusts====

A resulting trust can be created in the following circumstances:

*one party loans or gives money to the other party to allow them to buy an asset, and the person buying the asset owns the asset in their name alone, or
*one party transfers property to another without payment.

In each case, the person who transfers the money or asset to the other party is said to retain an interest, called a ''beneficial interest'', in the property even though the property is held by the other party in their name alone. In a court proceeding based on a resulting trust, the person making the claim, the ''claimant'', is asking for compensation for their beneficial interest in the property owned by the ''respondent'', the person against whom the claim is brought.

====Unjust enrichment and constructive trusts====

A constructive trust is called ''constructive'' because the claimant is asking the court to create or impose a trust on the respondent where there wasn't one before. According to the Supreme Court of Canada's decision in the 1980 case of [http://canlii.ca/t/1mjv ''Pettkus v. Becker''], [1980] 2 S.C.R. 834, one of the most important cases on constructive trusts, the court will impose a trust on a respondent where the claimant is able to show that the respondent has been ''unjustly enriched'' as a result of the claimant's labour or other services. Unjust enrichment is shown by proving that:

#the respondent was enriched as a result of the claimant's contributions,
#the claimant was correspondingly deprived, and
#there is no legal reason for the respondent's enrichment.

''Enrichment'' means to have received a benefit or advantage, such as money or the benefit of unpaid labour or other services. ''Deprivation'' means to have lost the value that might have been otherwise received for the claimant's benefit or advantage, such as the loss of the money or the wages that might have been paid for labour or other services. The deprivation must ''correspond'' to the enrichment, in the sense that the claimant was deprived of exactly the thing from which the respondent benefited. If the claimant can show these things, they will have established that the respondent was ''unjustly enriched'' by their contributions, and the court may impose a constructive trust to fix the situation.

(There are two other case from the Supreme Court of Canada that are critical in understanding constructive trusts, a 1993 case called ''[http://canlii.ca/t/1fs3f Peter v. Beblow]'', [1993] 1 S.C.R. 980, and a 2011 case called ''[http://canlii.ca/t/2fs3h Kerr v. Baranow]'', [2011] 1 S.C.R. 269 . To get a proper understanding of the law relating to constructive trusts, you should read all of ''Pettkus v. Becker'', ''Peter v. Beblow'', and ''Kerr v. Baranow''.)

Here's an example:

<blockquote>Frank moves into a home owned by Lois. Frank's role in the relationship is that of a homemaker while Lois works outside the home and brings home the bacon. Frank also, out of the kindness of his heart, helps Lois with her web design company, doing her books because he used to be a bookkeeper.</blockquote>
<blockquote>Lois doesn't pay Frank for his labour; perhaps it's understood that Frank is helping out with a common cause, since Lois' company is what provides the family with its income, or perhaps Frank's help is just one of the things he does because he loves Lois. Either way, payment isn't offered and it's not asked for, as is often the case when people are in a relationship.</blockquote>
<blockquote>Frank's labour in the home, cooking, cleaning and tidying, allows Lois to devote her time to the web design company, and saves her from having to hire a housekeeper and a cook, not to mention having to hire an office manager for the company.</blockquote>
<blockquote>Frank, on the other hand, is losing something. Frank could have sold his services as a housekeeper, a launderer and a cook. Frank could certainly have worked as an office manager or bookkeeper for some other company. Furthermore, Frank has made a positive contribution to Lois' company and helped it thrive and prosper.</blockquote>
<blockquote>The months pass. Lois' company has grown in value, and the relationship comes to a tragic end when Frank discovers that Lois' trips to visit the handsome internet service provider in Alberta were for both business and pleasure.</blockquote>

In this example, Lois was unjustly enriched by Frank's labour in the home and his contribution to the web design company, as she didn't have to hire an office administrator or a housekeeper. Frank, on the other hand, lost out on months of wages as an office administrator, and months of wages as a housekeeper. Lois was enriched by exactly the thing Frank was deprived of: his labour, and the financial value and benefit of his labour.

Once an unjust enrichment has been found, the court must determine what the appropriate remedy would be to compensate the applicant for their interest in the property. The court will often determine the value of the trust based on the value of the contribution made by the applicant to the property or the purchase of the property.

In the example above, a concrete value can be attached to Frank's contributions to the company and to his labour in the home: what would it have cost to hire a housekeeper and a bookkeeper during that period? Or, how much did Lois' company grow in value as a result of Frank's efforts? This is the beginning of fixing a dollar value on Frank's interest in the company and in Lois' house.

Again, trust claims are complex and the case law supporting and opposing such claims is massive. If you are not a spouse and wish to make claim against property owned only by your partner, I recommend that you hire a lawyer to help.

==Tax issues==

For many people, there will be no tax impact from the division of their assets. There will, however, be a tax impact if the division creates what the [http://www.cra-arc.gc.ca/menu-eng.html Canada Revenue Agency] deems to be ''income''.

The most common kind of taxable income people have is employment income. Some other kinds of taxable income include:

*the money you get when you cash in an RRSP,
*money received by a shareholder from a company as a dividend or from the sale of their shares,
*the interest you get from a loan you've made to someone else, and
*the profit realized from the sale or transfer of real property that isn't the family's principle residence.

When you report this sort of income in your tax return, the CRA considers it to be taxable income, income that may be taxable at different rates.

The purpose of this part of this section is to alert you in a general way to the possibility that there may be tax implications as a result of family property being divided, and that there are sometimes ways to avoid this sort of unfairness. This is, however, a complex area of family law, and if you have a problem of this nature, you really should get the advice of a lawyer who specializes in tax issues; store-bought or online tax software will not identify these issues. You probably don't want to pay any more tax than is absolutely necessary!

===Avoiding unfairness===

The tax consequences of a particular arrangement in a court order or separation agreement can be taken into account when property is being divided, since the payment of tax by one party may fundamentally change the fairness of the agreement or order. Consider this example:

<blockquote>Say Eli receives $100,000 in cash and George receives a rental house worth $100,000, and the cash and the rental house are all part of the family property. At first glance, this seems like a fair, equal split of the family property, which together comes to a total of $200,000. In fact, it isn't.</blockquote>
<blockquote>No tax will be payable by Eli as a result of receiving the cash. Tax will be payable by George if the rental house has to be sold, since it wasn't the family's primary residence. If the tax payable on the income George earns from the sale is $20,000, really, Eli has received $100,000 and George has received $80,000. If you count the tax that George has to pay, the division of the family property wasn't equal at all.</blockquote>
<blockquote>To make the split equal, Eli should pay George an extra $10,000 so that each spouse will have $90,000 once the rental house is sold.</blockquote>

The same problem can arise if one spouse has to sell an asset in order to satisfy an order or agreement for the division of property and debt, such as making a lump-sum payment to equalize the value of the assets held by each party. This may result in the CRA assessing an extra amount of taxable income to the party who had to sell the asset, with the consequence of an additional tax debt owed by that party to the CRA.

There is an easy way to avoid unfair tax consequences and preserve the intention of the agreement or court order: the agreement or order can recognize the negative tax consequences of a particular term and compensate the affected spouse, as in the example involving the rental house above. If you need to convince a court to take tax considerations into account in dividing assets, there are three general rules you should keep in mind:

*each case will depend on the particular circumstances of the parties,
*you should be able to provide an estimate of the tax which will be payable, and
*you must be able to show that the sale or transaction that will result in tax being payable is likely to occur in the reasonably near future.

===Dividing RRSPs===

Normally, if you wish to cash out an RRSP, you have to pay tax on the RRSP as if the RRSP was taxable income, like employment income. Under the federal ''[http://canlii.ca/t/7vb7 Income Tax Act]'', transfers of RRSPs between spouses are tax neutral, under what are called the ''tax-free spousal rollover'' provisions of the act.

When RRSPs are to be transferred between spouses according to a separation agreement or court order, the RRSPs are simply transferred between the spouses' RRSP accounts without having to cash them out, and no tax is payable. Your bank or credit union can provide you with the form to do this.

===Real property===

When a piece of property is to be transferred between spouses according to a separation agreement or court order, the parties should use the province's [http://www.bcrelinks.com/download/ptt/pttform2.pdf Special Property Transfer Tax Form], to take advantage of the tax-free status of transfers between spouses made pursuant to family agreements and court orders. This form is normally completed during the process of transferring title to the property at the Land Title and Survey Authority, and no tax will be payable on the transfer.

==Resources and links==

===Legislation===

* ''[[Family Law Act]]''
* ''[http://canlii.ca/t/848q Partition of Property Act]''
* ''[http://canlii.ca/t/7vb7 Income Tax Act]''

===Links===

* [http://www.clicklaw.bc.ca/resource/1240 Canadian Bar Association BC Branch: Dividing property and debts]
* [http://www.clicklaw.bc.ca/resource/1529 Justice Education Society: Workbook for parents separated with children on dealing with finances]
* [http://www.clicklaw.bc.ca/resource/1639 Legal Services Society’s Family Law Website: How to divide property and debts]
* [http://www.bcrelinks.com/download/ptt/pttform2.pdf Special Property Transfer Tax Return]

{{REVIEWED | reviewer = [[Helen Chiu]], May 14, 2019}}

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[[Category:JP Boyd on Family Law]]

Basic Principles of Property and Debt in Family Law

2019-05-14T20:43:47Z

Helen Chiu:

{{JP Boyd on Family Law TOC|expanded = assets}}{{JPBOFL Editor Badge
|ChapterEditors = [[Helen Chiu]] and [[Matthew Ostrow]]
}}{{LSSbadge
| resourcetype = a fact sheet on
| link = [http://www.clicklaw.bc.ca/resource/1639 How to divide property and debts]
}}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''.

==Introduction==

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.

===Standing===

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:

<blockquote><tt>(1) A person is a spouse for the purposes of this Act if the person</tt></blockquote>
<blockquote><blockquote><tt>(a) is married to another person, or</tt></blockquote></blockquote>
<blockquote><blockquote><tt>(b) has lived with another person in a marriage-like relationship, and</tt></blockquote></blockquote>
<blockquote><blockquote><blockquote><tt>(i) has done so for a continuous period of at least 2 years, or</tt></blockquote></blockquote></blockquote>
<blockquote><blockquote><blockquote><tt>(ii) except in Parts 5 [Property Division] and 6 [Pension Division], has a child with the other person.</tt></blockquote></blockquote></blockquote>
<blockquote><tt>(2) A spouse includes a former spouse.</tt></blockquote>

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_%26_Debt_in_Family_Law_Matters#Property_claims_and_people_who_aren.27t_spouses|property claims and people who aren't spouses]]," and in the chapter [[Family Relationships]] in the section [[Other Unmarried Relationships.]]

===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:

<blockquote><tt>(a) on the date the spouses separate, property</tt></blockquote>
<blockquote><blockquote><tt>(i) that is owned by at least one spouse, or</tt></blockquote></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:

<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:

<blockquote><tt>Family debt includes all financial obligations incurred by a spouse</tt></blockquote>
<blockquote><blockquote><tt>(a) during the period beginning when the relationship between the spouses begins and ending when the spouses separate</tt></blockquote></blockquote>

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====

Section 3(3) says when a relationship between spouses begins:

<blockquote><tt>(3) A relationship between spouses begins on the earlier of the following:</tt></blockquote>
<blockquote><blockquote><tt>(a) the date on which they began to live together in a marriage-like relationship;</tt></blockquote></blockquote>
<blockquote><blockquote><tt>(b) the date of their marriage.</tt></blockquote></blockquote>

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, ''[http://canlii.ca/t/5bpc Yakiwchuk v. Oaks]'', 2003 SKQB 124, expressed the problem this way:

<blockquote>"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."</blockquote>

Hands up, anyone who has ever begun to "cohabit with little forethought or planning?"

====The date of separation====

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.

<blockquote><tt>(4) For the purposes of this Act,</tt></blockquote>
<blockquote><blockquote><tt>(a) Spouses may be separated despite continuing to live in the same residence, and</tt></blockquote></blockquote>
<blockquote><blockquote><tt>(b) the court may consider, as evidence of separation,</tt></blockquote></blockquote>
<blockquote><blockquote><blockquote><tt>(i) communication, by one spouse to the other spouse, of an intention to separate permanently, and</tt></blockquote></blockquote></blockquote>
<blockquote><blockquote><blockquote><tt>(ii) an action, taken by a spouse, that demonstrates the spouse's intention to separate permanently.</tt></blockquote></blockquote></blockquote>

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====

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 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."

===A partnership of acquests===

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''====

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:

<blockquote><tt>spouses are both entitled to family property and responsible for family debt, regardless of their respective use or contribution</tt></blockquote>

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 brought with excluded property.

====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:

<blockquote><tt>(2) Unless the spouses agree otherwise, </tt></blockquote>
<blockquote><blockquote><tt>(a) a proceeding to enforce, set aside or replace an agreement respecting property division made before the coming into force of this section, or</tt></blockquote></blockquote>
<blockquote><blockquote><tt>(b) a proceeding respecting property division started under the former Act</tt></blockquote></blockquote>
<blockquote><tt>must be started or continued, as applicable, under the former Act as if the former Act had not been repealed.</tt></blockquote>

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''==

The general rule about how property and debt are divided under the ''Family Law Act'' is found in s. 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>
<blockquote><blockquote><tt>(a) spouses are both entitled to family property and responsible for family debt, regardless of their respective use or contribution, and</tt></blockquote></blockquote>
<blockquote><blockquote><tt>(b) 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.</tt></blockquote></blockquote>

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===

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.

Section 84(2) gets into the specifics of the sorts of things that might be family property:

<blockquote><tt>(2) Without limiting subsection (1), family property includes the following:</tt></blockquote>
<blockquote><blockquote><tt>(a) a share or an interest in a corporation; </tt></blockquote></blockquote>
<blockquote><blockquote><tt>(b) an interest in a partnership, an association, an organization, a business or a venture; </tt></blockquote></blockquote>
<blockquote><blockquote><tt>(c) property owing to a spouse</tt></blockquote></blockquote>
<blockquote><blockquote><blockquote><tt>(i) as a refund, including an income tax refund, or</tt></blockquote></blockquote></blockquote>
<blockquote><blockquote><blockquote><tt>(ii) in return for the provision of a good or service; </tt></blockquote></blockquote></blockquote>
<blockquote><blockquote><tt>(d) money of a spouse in an account with a financial institution; </tt></blockquote></blockquote>
<blockquote><blockquote><tt>(e) a spouse's entitlement under an annuity, a pension, a retirement savings plan or an income plan; </tt></blockquote></blockquote>
<blockquote><blockquote><tt>(f) property, other than property to which subsection (3) applies, that a spouse disposes of after the relationship between the spouses began, but over which the spouse retains authority, to be exercised alone or with another person, to require its return or to direct its use or further disposition in any way; </tt></blockquote></blockquote>
<blockquote><blockquote><tt>(g) the amount by which the value of excluded property has increased since the later of the date</tt></blockquote></blockquote>
<blockquote><blockquote><blockquote><tt>(i) the relationship between the spouses began, or</tt></blockquote></blockquote></blockquote>
<blockquote><blockquote><blockquote><tt>(ii) the excluded property was acquired. </tt></blockquote></blockquote></blockquote>
<blockquote><tt>(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</tt></blockquote>
<blockquote><blockquote><tt>(a) the spouse is a beneficiary, and has a vested interest in that part of the trust property that is not subject to divestment, </tt></blockquote></blockquote>
<blockquote><blockquote><tt>(b) the spouse has a power to transfer to himself or herself that part of the trust property, or</tt></blockquote></blockquote>
<blockquote><blockquote><tt>(c) the spouse has a power to terminate the trust and, on termination, that part of the trust property reverts to the spouse. </tt></blockquote></blockquote>

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 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.

The definition of family debt is at s. 86 and is much shorter:

<blockquote><tt>Family debt includes all financial obligations incurred by a spouse</tt></blockquote>
<blockquote><blockquote><tt>(a) during the period beginning when the relationship between the spouses begins and ending when the spouses separate, and</tt></blockquote></blockquote>
<blockquote><blockquote><tt>(b) after the date of separation, if incurred for the purpose of maintaining family property.</tt></blockquote></blockquote>

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.

====Separation====

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=====

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=====

S. 81(b) of the ''Family Law Act'' states:

<blockquote><tt>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.</tt></blockquote>

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's trustee is the bankrupt's one-half interest; the other spouse's interest in that asset will be preserved from the bankrupt'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====

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 of 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, 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''.

Excluded property is defined at s. 85(1):

<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>
<blockquote><blockquote><tt>(b) gifts or inheritances to a spouse; </tt></blockquote></blockquote>
<blockquote><blockquote><tt>(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</tt></blockquote></blockquote>
<blockquote><blockquote><blockquote><tt>(i) loss to both spouses, or</tt></blockquote></blockquote></blockquote>
<blockquote><blockquote><blockquote><tt>(ii) lost income of a spouse; </tt></blockquote></blockquote></blockquote>
<blockquote><blockquote><tt>(d) money paid or payable under an insurance policy, other than a policy respecting property, except any portion that represents compensation for</tt></blockquote></blockquote>
<blockquote><blockquote><blockquote><tt>(i) loss to both spouses, or</tt></blockquote></blockquote></blockquote>
<blockquote><blockquote><blockquote><tt>(ii) lost income of a spouse; </tt></blockquote></blockquote></blockquote>
<blockquote><blockquote><tt>(e) property referred to in any of paragraphs (a) to (d) that is held in trust for the benefit of a spouse;</tt></blockquote></blockquote>
<blockquote><blockquote><tt>(f) property held in a discretionary trust</tt></blockquote></blockquote>
<blockquote><blockquote><blockquote><tt>(i) to which the spouse did not contribute, </tt></blockquote></blockquote></blockquote>
<blockquote><blockquote><blockquote><tt>(ii) of which the spouse is a beneficiary, and</tt></blockquote></blockquote></blockquote>
<blockquote><blockquote><blockquote><tt>(iii) that is settled by a person other than the spouse; </tt></blockquote></blockquote></blockquote>
<blockquote><blockquote><tt>(g) property derived from property or the disposition of property referred to in any of paragraphs (a) to (f).</tt></blockquote></blockquote>

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),
*inheritances,
*court awards,
*insurance payments, and
*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''.

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 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====

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====

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.

Remember, under s. 85(2) it's up to the person claiming 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:

*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===

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:

<blockquote><tt>(1) Subject to this Part and Part 6, each spouse is entitled to an interest in each family asset ...</tt></blockquote>
<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:

<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>

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===

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 of the court or the parties' agreement.

===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''.

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.

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:

<blockquote><tt>(a) the duration of the marriage,</tt></blockquote>
<blockquote><tt>(b) the duration of the period during which the spouses have lived separate and apart,</tt></blockquote>
<blockquote><tt>(c) the date when property was acquired or disposed of,</tt></blockquote>
<blockquote><tt>(d) the extent to which property was acquired by one spouse through inheritance or gift,</tt></blockquote>
<blockquote><tt>(e) the needs of each spouse to become or remain economically independent and self sufficient, or</tt></blockquote>
<blockquote><tt>(f) any other circumstances relating to the acquisition, preservation, maintenance, improvement or use of property or the capacity or liabilities of a spouse</tt></blockquote>

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"===

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:

<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>
<blockquote><tt>(3) Without restricting subsection (2), the definition of family asset includes the following:</tt></blockquote>
<blockquote><blockquote><tt>(a) if a corporation or trust owns property that would be a family asset if owned by a spouse,</tt></blockquote></blockquote>
<blockquote><blockquote><blockquote><tt>(i) a share in the corporation, or</tt></blockquote></blockquote></blockquote>
<blockquote><blockquote><blockquote><tt>(ii) an interest in the trust</tt></blockquote></blockquote></blockquote>
<blockquote><blockquote><tt>owned by the spouse;</tt></blockquote></blockquote>
<blockquote><blockquote><tt>(b) if property would be a family asset if owned by a spouse, property</tt></blockquote></blockquote>
<blockquote><blockquote><blockquote><tt>(i) over which the spouse has, either alone or with another person, a power of appointment exercisable in favour of himself or herself, or</tt></blockquote></blockquote></blockquote>
<blockquote><blockquote><blockquote><tt>(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;</tt></blockquote></blockquote></blockquote>
<blockquote><blockquote><tt>(c) money of a spouse in an account with a savings institution if that account is ordinarily used for a family purpose;</tt></blockquote></blockquote>
<blockquote><blockquote><tt>(d) a right of a spouse under an annuity or a pension, home ownership or retirement savings plan;</tt></blockquote></blockquote>
<blockquote><blockquote><tt>(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.</tt></blockquote></blockquote>

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==

[[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 at 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 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 begain,
*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.

==Resources and links==

===Legislation===

* ''[[Family Law Act]]''
* ''[[Family Relations Act]]''

===Links===

* [http://www.clicklaw.bc.ca/resource/1240 Canadian Bar Association BC Branch: Dividing property and debts]
* [http://www.clicklaw.bc.ca/resource/1529 Justice Education Society: Workbook for parents separated with children on dealing with finances]
* [http://www.clicklaw.bc.ca/resource/1639 Legal Services Society’s Family Law Website: How to divide property and debts]

{{REVIEWED | reviewer = [[Helen Chiu]], May 14, 2019}}

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[[Category:JP Boyd on Family Law]]

Basic Principles of Property and Debt in Family Law

2019-05-14T20:41:49Z

Helen Chiu:

{{JP Boyd on Family Law TOC|expanded = assets}}{{JPBOFL Editor Badge
|ChapterEditors = [[Helen Chiu]] and [[Matthew Ostrow]]
}}{{LSSbadge
| resourcetype = a fact sheet on
| link = [http://www.clicklaw.bc.ca/resource/1639 How to divide property and debts]
}}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''.

==Introduction==

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 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.

===Standing===

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:

<blockquote><tt>(1) A person is a spouse for the purposes of this Act if the person</tt></blockquote>
<blockquote><blockquote><tt>(a) is married to another person, or</tt></blockquote></blockquote>
<blockquote><blockquote><tt>(b) has lived with another person in a marriage-like relationship, and</tt></blockquote></blockquote>
<blockquote><blockquote><blockquote><tt>(i) has done so for a continuous period of at least 2 years, or</tt></blockquote></blockquote></blockquote>
<blockquote><blockquote><blockquote><tt>(ii) except in Parts 5 [Property Division] and 6 [Pension Division], has a child with the other person.</tt></blockquote></blockquote></blockquote>
<blockquote><tt>(2) A spouse includes a former spouse.</tt></blockquote>

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_%26_Debt_in_Family_Law_Matters#Property_claims_and_people_who_aren.27t_spouses|property claims and people who aren't spouses]]," and in the chapter [[Family Relationships]] in the section [[Other Unmarried Relationships.]]

===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:

<blockquote><tt>(a) on the date the spouses separate, property</tt></blockquote>
<blockquote><blockquote><tt>(i) that is owned by at least one spouse, or</tt></blockquote></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:

<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:

<blockquote><tt>Family debt includes all financial obligations incurred by a spouse</tt></blockquote>
<blockquote><blockquote><tt>(a) during the period beginning when the relationship between the spouses begins and ending when the spouses separate</tt></blockquote></blockquote>

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====

Section 3(3) says when a relationship between spouses begins:

<blockquote><tt>(3) A relationship between spouses begins on the earlier of the following:</tt></blockquote>
<blockquote><blockquote><tt>(a) the date on which they began to live together in a marriage-like relationship;</tt></blockquote></blockquote>
<blockquote><blockquote><tt>(b) the date of their marriage.</tt></blockquote></blockquote>

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, ''[http://canlii.ca/t/5bpc Yakiwchuk v. Oaks]'', 2003 SKQB 124, expressed the problem this way:

<blockquote>"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."</blockquote>

Hands up, anyone who has ever begun to "cohabit with little forethought or planning?"

====The date of separation====

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.

<blockquote><tt>(4) For the purposes of this Act,</tt></blockquote>
<blockquote><blockquote><tt>(a) Spouses may be separated despite continuing to live in the same residence, and</tt></blockquote></blockquote>
<blockquote><blockquote><tt>(b) the court may consider, as evidence of separation,</tt></blockquote></blockquote>
<blockquote><blockquote><blockquote><tt>(i) communication, by one spouse to the other spouse, of an intention to separate permanently, and</tt></blockquote></blockquote></blockquote>
<blockquote><blockquote><blockquote><tt>(ii) an action, taken by a spouse, that demonstrates the spouse's intention to separate permanently.</tt></blockquote></blockquote></blockquote>

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====

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 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."

===A partnership of acquests===

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''====

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:

<blockquote><tt>spouses are both entitled to family property and responsible for family debt, regardless of their respective use or contribution</tt></blockquote>

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 brought with excluded property.

====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:

<blockquote><tt>(2) Unless the spouses agree otherwise, </tt></blockquote>
<blockquote><blockquote><tt>(a) a proceeding to enforce, set aside or replace an agreement respecting property division made before the coming into force of this section, or</tt></blockquote></blockquote>
<blockquote><blockquote><tt>(b) a proceeding respecting property division started under the former Act</tt></blockquote></blockquote>
<blockquote><tt>must be started or continued, as applicable, under the former Act as if the former Act had not been repealed.</tt></blockquote>

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''==

The general rule about how property and debt are divided under the ''Family Law Act'' is found in s. 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>
<blockquote><blockquote><tt>(a) spouses are both entitled to family property and responsible for family debt, regardless of their respective use or contribution, and</tt></blockquote></blockquote>
<blockquote><blockquote><tt>(b) 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.</tt></blockquote></blockquote>

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===

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.

Section 84(2) gets into the specifics of the sorts of things that might be family property:

<blockquote><tt>(2) Without limiting subsection (1), family property includes the following:</tt></blockquote>
<blockquote><blockquote><tt>(a) a share or an interest in a corporation; </tt></blockquote></blockquote>
<blockquote><blockquote><tt>(b) an interest in a partnership, an association, an organization, a business or a venture; </tt></blockquote></blockquote>
<blockquote><blockquote><tt>(c) property owing to a spouse</tt></blockquote></blockquote>
<blockquote><blockquote><blockquote><tt>(i) as a refund, including an income tax refund, or</tt></blockquote></blockquote></blockquote>
<blockquote><blockquote><blockquote><tt>(ii) in return for the provision of a good or service; </tt></blockquote></blockquote></blockquote>
<blockquote><blockquote><tt>(d) money of a spouse in an account with a financial institution; </tt></blockquote></blockquote>
<blockquote><blockquote><tt>(e) a spouse's entitlement under an annuity, a pension, a retirement savings plan or an income plan; </tt></blockquote></blockquote>
<blockquote><blockquote><tt>(f) property, other than property to which subsection (3) applies, that a spouse disposes of after the relationship between the spouses began, but over which the spouse retains authority, to be exercised alone or with another person, to require its return or to direct its use or further disposition in any way; </tt></blockquote></blockquote>
<blockquote><blockquote><tt>(g) the amount by which the value of excluded property has increased since the later of the date</tt></blockquote></blockquote>
<blockquote><blockquote><blockquote><tt>(i) the relationship between the spouses began, or</tt></blockquote></blockquote></blockquote>
<blockquote><blockquote><blockquote><tt>(ii) the excluded property was acquired. </tt></blockquote></blockquote></blockquote>
<blockquote><tt>(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</tt></blockquote>
<blockquote><blockquote><tt>(a) the spouse is a beneficiary, and has a vested interest in that part of the trust property that is not subject to divestment, </tt></blockquote></blockquote>
<blockquote><blockquote><tt>(b) the spouse has a power to transfer to himself or herself that part of the trust property, or</tt></blockquote></blockquote>
<blockquote><blockquote><tt>(c) the spouse has a power to terminate the trust and, on termination, that part of the trust property reverts to the spouse. </tt></blockquote></blockquote>

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 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.

The definition of family debt is at s. 86 and is much shorter:

<blockquote><tt>Family debt includes all financial obligations incurred by a spouse</tt></blockquote>
<blockquote><blockquote><tt>(a) during the period beginning when the relationship between the spouses begins and ending when the spouses separate, and</tt></blockquote></blockquote>
<blockquote><blockquote><tt>(b) after the date of separation, if incurred for the purpose of maintaining family property.</tt></blockquote></blockquote>

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.

====Separation====

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=====

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=====

S. 81(b) of the ''Family Law Act'' states:

<blockquote><tt>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.</tt></blockquote>

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's trustee is the bankrupt's one-half interest; the other spouse's interest in that asset will be preserved from the bankrupt'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====

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 of 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, 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''.

Excluded property is defined at s. 85(1):

<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>
<blockquote><blockquote><tt>(b) gifts or inheritances to a spouse; </tt></blockquote></blockquote>
<blockquote><blockquote><tt>(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</tt></blockquote></blockquote>
<blockquote><blockquote><blockquote><tt>(i) loss to both spouses, or</tt></blockquote></blockquote></blockquote>
<blockquote><blockquote><blockquote><tt>(ii) lost income of a spouse; </tt></blockquote></blockquote></blockquote>
<blockquote><blockquote><tt>(d) money paid or payable under an insurance policy, other than a policy respecting property, except any portion that represents compensation for</tt></blockquote></blockquote>
<blockquote><blockquote><blockquote><tt>(i) loss to both spouses, or</tt></blockquote></blockquote></blockquote>
<blockquote><blockquote><blockquote><tt>(ii) lost income of a spouse; </tt></blockquote></blockquote></blockquote>
<blockquote><blockquote><tt>(e) property referred to in any of paragraphs (a) to (d) that is held in trust for the benefit of a spouse;</tt></blockquote></blockquote>
<blockquote><blockquote><tt>(f) property held in a discretionary trust</tt></blockquote></blockquote>
<blockquote><blockquote><blockquote><tt>(i) to which the spouse did not contribute, </tt></blockquote></blockquote></blockquote>
<blockquote><blockquote><blockquote><tt>(ii) of which the spouse is a beneficiary, and</tt></blockquote></blockquote></blockquote>
<blockquote><blockquote><blockquote><tt>(iii) that is settled by a person other than the spouse; </tt></blockquote></blockquote></blockquote>
<blockquote><blockquote><tt>(g) property derived from property or the disposition of property referred to in any of paragraphs (a) to (f).</tt></blockquote></blockquote>

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),
*inheritances,
*court awards,
*insurance payments, and
*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''.

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 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====

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====

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.

Remember, under s. 85(2) it's up to the person claiming 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:

*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===

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:

<blockquote><tt>(1) Subject to this Part and Part 6, each spouse is entitled to an interest in each family asset ...</tt></blockquote>
<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:

<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>

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===

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 of the court or the parties' agreement.

===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''.

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.

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:

<blockquote><tt>(a) the duration of the marriage,</tt></blockquote>
<blockquote><tt>(b) the duration of the period during which the spouses have lived separate and apart,</tt></blockquote>
<blockquote><tt>(c) the date when property was acquired or disposed of,</tt></blockquote>
<blockquote><tt>(d) the extent to which property was acquired by one spouse through inheritance or gift,</tt></blockquote>
<blockquote><tt>(e) the needs of each spouse to become or remain economically independent and self sufficient, or</tt></blockquote>
<blockquote><tt>(f) any other circumstances relating to the acquisition, preservation, maintenance, improvement or use of property or the capacity or liabilities of a spouse</tt></blockquote>

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"===

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:

<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>
<blockquote><tt>(3) Without restricting subsection (2), the definition of family asset includes the following:</tt></blockquote>
<blockquote><blockquote><tt>(a) if a corporation or trust owns property that would be a family asset if owned by a spouse,</tt></blockquote></blockquote>
<blockquote><blockquote><blockquote><tt>(i) a share in the corporation, or</tt></blockquote></blockquote></blockquote>
<blockquote><blockquote><blockquote><tt>(ii) an interest in the trust</tt></blockquote></blockquote></blockquote>
<blockquote><blockquote><tt>owned by the spouse;</tt></blockquote></blockquote>
<blockquote><blockquote><tt>(b) if property would be a family asset if owned by a spouse, property</tt></blockquote></blockquote>
<blockquote><blockquote><blockquote><tt>(i) over which the spouse has, either alone or with another person, a power of appointment exercisable in favour of himself or herself, or</tt></blockquote></blockquote></blockquote>
<blockquote><blockquote><blockquote><tt>(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;</tt></blockquote></blockquote></blockquote>
<blockquote><blockquote><tt>(c) money of a spouse in an account with a savings institution if that account is ordinarily used for a family purpose;</tt></blockquote></blockquote>
<blockquote><blockquote><tt>(d) a right of a spouse under an annuity or a pension, home ownership or retirement savings plan;</tt></blockquote></blockquote>
<blockquote><blockquote><tt>(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.</tt></blockquote></blockquote>

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==

[[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 at 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 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 begain,
*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.

==Resources and links==

===Legislation===

* ''[[Family Law Act]]''
* ''[[Family Relations Act]]''

===Links===

* [http://www.clicklaw.bc.ca/resource/1240 Canadian Bar Association BC Branch: Dividing property and debts]
* [http://www.clicklaw.bc.ca/resource/1529 Justice Education Society: Workbook for parents separated with children on dealing with finances]
* [http://www.clicklaw.bc.ca/resource/1639 Legal Services Society’s Family Law Website: How to divide property and debts]

{{REVIEWED | reviewer = [[Helen Chiu]], May 14, 2019}}

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[[Category:JP Boyd on Family Law]]

Basic Principles of Property and Debt in Family Law

2019-05-14T19:46:30Z

Helen Chiu:

{{JP Boyd on Family Law TOC|expanded = assets}}{{JPBOFL Editor Badge
|ChapterEditors = [[Helen Chiu]] and [[Matthew Ostrow]]
}}{{LSSbadge
| resourcetype = a fact sheet on
| link = [http://www.clicklaw.bc.ca/resource/1639 How to divide property and debts]
}}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''.

==Introduction==

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 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.

===Standing===

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:

<blockquote><tt>(1) A person is a spouse for the purposes of this Act if the person</tt></blockquote>
<blockquote><blockquote><tt>(a) is married to another person, or</tt></blockquote></blockquote>
<blockquote><blockquote><tt>(b) has lived with another person in a marriage-like relationship, and</tt></blockquote></blockquote>
<blockquote><blockquote><blockquote><tt>(i) has done so for a continuous period of at least 2 years, or</tt></blockquote></blockquote></blockquote>
<blockquote><blockquote><blockquote><tt>(ii) except in Parts 5 [Property Division] and 6 [Pension Division], has a child with the other person.</tt></blockquote></blockquote></blockquote>
<blockquote><tt>(2) A spouse includes a former spouse.</tt></blockquote>

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_%26_Debt_in_Family_Law_Matters#Property_claims_and_people_who_aren.27t_spouses|property claims and people who aren't spouses]]," and in the chapter [[Family Relationships]] in the section [[Other Unmarried Relationships.]]

===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:

<blockquote><tt>(a) on the date the spouses separate, property</tt></blockquote>
<blockquote><blockquote><tt>(i) that is owned by at least one spouse, or</tt></blockquote></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:

<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:

<blockquote><tt>Family debt includes all financial obligations incurred by a spouse</tt></blockquote>
<blockquote><blockquote><tt>(a) during the period beginning when the relationship between the spouses begins and ending when the spouses separate</tt></blockquote></blockquote>

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====

Section 3(3) says when a relationship between spouses begins:

<blockquote><tt>(3) A relationship between spouses begins on the earlier of the following:</tt></blockquote>
<blockquote><blockquote><tt>(a) the date on which they began to live together in a marriage-like relationship;</tt></blockquote></blockquote>
<blockquote><blockquote><tt>(b) the date of their marriage.</tt></blockquote></blockquote>

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, ''[http://canlii.ca/t/5bpc Yakiwchuk v. Oaks]'', 2003 SKQB 124, expressed the problem this way:

<blockquote>"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."</blockquote>

Hands up, anyone who has ever begun to "cohabit with little forethought or planning?"

====The date of separation====

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.

<blockquote><tt>(4) For the purposes of this Act,</tt></blockquote>
<blockquote><blockquote><tt>(a) Spouses may be separated despite continuing to live in the same residence, and</tt></blockquote></blockquote>
<blockquote><blockquote><tt>(b) the court may consider, as evidence of separation,</tt></blockquote></blockquote>
<blockquote><blockquote><blockquote><tt>(i) communication, by one spouse to the other spouse, of an intention to separate permanently, and</tt></blockquote></blockquote></blockquote>
<blockquote><blockquote><blockquote><tt>(ii) an action, taken by a spouse, that demonstrates the spouse's intention to separate permanently.</tt></blockquote></blockquote></blockquote>

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====

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 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."

===A partnership of acquests===

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''====

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:

<blockquote><tt>spouses are both entitled to family property and responsible for family debt, regardless of their respective use or contribution</tt></blockquote>

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 brought with excluded property.

====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:

<blockquote><tt>(2) Unless the spouses agree otherwise, </tt></blockquote>
<blockquote><blockquote><tt>(a) a proceeding to enforce, set aside or replace an agreement respecting property division made before the coming into force of this section, or</tt></blockquote></blockquote>
<blockquote><blockquote><tt>(b) a proceeding respecting property division started under the former Act</tt></blockquote></blockquote>
<blockquote><tt>must be started or continued, as applicable, under the former Act as if the former Act had not been repealed.</tt></blockquote>

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''==

The general rule about how property and debt are divided under the ''Family Law Act'' is found in s. 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>
<blockquote><blockquote><tt>(a) spouses are both entitled to family property and responsible for family debt, regardless of their respective use or contribution, and</tt></blockquote></blockquote>
<blockquote><blockquote><tt>(b) 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.</tt></blockquote></blockquote>

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===

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.

Section 84(2) gets into the specifics of the sorts of things that might be family property:

<blockquote><tt>(2) Without limiting subsection (1), family property includes the following:</tt></blockquote>
<blockquote><blockquote><tt>(a) a share or an interest in a corporation; </tt></blockquote></blockquote>
<blockquote><blockquote><tt>(b) an interest in a partnership, an association, an organization, a business or a venture; </tt></blockquote></blockquote>
<blockquote><blockquote><tt>(c) property owing to a spouse</tt></blockquote></blockquote>
<blockquote><blockquote><blockquote><tt>(i) as a refund, including an income tax refund, or</tt></blockquote></blockquote></blockquote>
<blockquote><blockquote><blockquote><tt>(ii) in return for the provision of a good or service; </tt></blockquote></blockquote></blockquote>
<blockquote><blockquote><tt>(d) money of a spouse in an account with a financial institution; </tt></blockquote></blockquote>
<blockquote><blockquote><tt>(e) a spouse's entitlement under an annuity, a pension, a retirement savings plan or an income plan; </tt></blockquote></blockquote>
<blockquote><blockquote><tt>(f) property, other than property to which subsection (3) applies, that a spouse disposes of after the relationship between the spouses began, but over which the spouse retains authority, to be exercised alone or with another person, to require its return or to direct its use or further disposition in any way; </tt></blockquote></blockquote>
<blockquote><blockquote><tt>(g) the amount by which the value of excluded property has increased since the later of the date</tt></blockquote></blockquote>
<blockquote><blockquote><blockquote><tt>(i) the relationship between the spouses began, or</tt></blockquote></blockquote></blockquote>
<blockquote><blockquote><blockquote><tt>(ii) the excluded property was acquired. </tt></blockquote></blockquote></blockquote>
<blockquote><tt>(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</tt></blockquote>
<blockquote><blockquote><tt>(a) the spouse is a beneficiary, and has a vested interest in that part of the trust property that is not subject to divestment, </tt></blockquote></blockquote>
<blockquote><blockquote><tt>(b) the spouse has a power to transfer to himself or herself that part of the trust property, or</tt></blockquote></blockquote>
<blockquote><blockquote><tt>(c) the spouse has a power to terminate the trust and, on termination, that part of the trust property reverts to the spouse. </tt></blockquote></blockquote>

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 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.

The definition of family debt is at s. 86 and is much shorter:

<blockquote><tt>Family debt includes all financial obligations incurred by a spouse</tt></blockquote>
<blockquote><blockquote><tt>(a) during the period beginning when the relationship between the spouses begins and ending when the spouses separate, and</tt></blockquote></blockquote>
<blockquote><blockquote><tt>(b) after the date of separation, if incurred for the purpose of maintaining family property.</tt></blockquote></blockquote>

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.

====Separation====

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=====

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=====

S. 81(b) of the ''Family Law Act'' states:

<blockquote><tt>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.</tt></blockquote>

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's trustee is the bankrupt's one-half interest; the other spouse's interest in that asset will be preserved from the bankrupt'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====

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 of 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, 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''.

Excluded property is defined at s. 85(1):

<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>
<blockquote><blockquote><tt>(b) gifts or inheritances to a spouse; </tt></blockquote></blockquote>
<blockquote><blockquote><tt>(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</tt></blockquote></blockquote>
<blockquote><blockquote><blockquote><tt>(i) loss to both spouses, or</tt></blockquote></blockquote></blockquote>
<blockquote><blockquote><blockquote><tt>(ii) lost income of a spouse; </tt></blockquote></blockquote></blockquote>
<blockquote><blockquote><tt>(d) money paid or payable under an insurance policy, other than a policy respecting property, except any portion that represents compensation for</tt></blockquote></blockquote>
<blockquote><blockquote><blockquote><tt>(i) loss to both spouses, or</tt></blockquote></blockquote></blockquote>
<blockquote><blockquote><blockquote><tt>(ii) lost income of a spouse; </tt></blockquote></blockquote></blockquote>
<blockquote><blockquote><tt>(e) property referred to in any of paragraphs (a) to (d) that is held in trust for the benefit of a spouse;</tt></blockquote></blockquote>
<blockquote><blockquote><tt>(f) property held in a discretionary trust</tt></blockquote></blockquote>
<blockquote><blockquote><blockquote><tt>(i) to which the spouse did not contribute, </tt></blockquote></blockquote></blockquote>
<blockquote><blockquote><blockquote><tt>(ii) of which the spouse is a beneficiary, and</tt></blockquote></blockquote></blockquote>
<blockquote><blockquote><blockquote><tt>(iii) that is settled by a person other than the spouse; </tt></blockquote></blockquote></blockquote>
<blockquote><blockquote><tt>(g) property derived from property or the disposition of property referred to in any of paragraphs (a) to (f).</tt></blockquote></blockquote>

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),
*inheritances,
*court awards,
*insurance payments, and
*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''.

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 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====

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====

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.

Remember, under s. 85(2) it's up to the person claiming 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:

*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===

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:

<blockquote><tt>(1) Subject to this Part and Part 6, each spouse is entitled to an interest in each family asset ...</tt></blockquote>
<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:

<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>

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===

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 of the court or the parties' agreement.

===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''.

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.

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:

<blockquote><tt>(a) the duration of the marriage,</tt></blockquote>
<blockquote><tt>(b) the duration of the period during which the spouses have lived separate and apart,</tt></blockquote>
<blockquote><tt>(c) the date when property was acquired or disposed of,</tt></blockquote>
<blockquote><tt>(d) the extent to which property was acquired by one spouse through inheritance or gift,</tt></blockquote>
<blockquote><tt>(e) the needs of each spouse to become or remain economically independent and self sufficient, or</tt></blockquote>
<blockquote><tt>(f) any other circumstances relating to the acquisition, preservation, maintenance, improvement or use of property or the capacity or liabilities of a spouse</tt></blockquote>

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"===

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:

<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>
<blockquote><tt>(3) Without restricting subsection (2), the definition of family asset includes the following:</tt></blockquote>
<blockquote><blockquote><tt>(a) if a corporation or trust owns property that would be a family asset if owned by a spouse,</tt></blockquote></blockquote>
<blockquote><blockquote><blockquote><tt>(i) a share in the corporation, or</tt></blockquote></blockquote></blockquote>
<blockquote><blockquote><blockquote><tt>(ii) an interest in the trust</tt></blockquote></blockquote></blockquote>
<blockquote><blockquote><tt>owned by the spouse;</tt></blockquote></blockquote>
<blockquote><blockquote><tt>(b) if property would be a family asset if owned by a spouse, property</tt></blockquote></blockquote>
<blockquote><blockquote><blockquote><tt>(i) over which the spouse has, either alone or with another person, a power of appointment exercisable in favour of himself or herself, or</tt></blockquote></blockquote></blockquote>
<blockquote><blockquote><blockquote><tt>(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;</tt></blockquote></blockquote></blockquote>
<blockquote><blockquote><tt>(c) money of a spouse in an account with a savings institution if that account is ordinarily used for a family purpose;</tt></blockquote></blockquote>
<blockquote><blockquote><tt>(d) a right of a spouse under an annuity or a pension, home ownership or retirement savings plan;</tt></blockquote></blockquote>
<blockquote><blockquote><tt>(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.</tt></blockquote></blockquote>

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==

[[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 at 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 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 begain,
*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.

==Resources and links==

===Legislation===

* ''[[Family Law Act]]''
* ''[[Family Relations Act]]''

===Links===

* [http://www.clicklaw.bc.ca/resource/1240 Canadian Bar Association BC Branch: Dividing property and debts]
* [http://www.clicklaw.bc.ca/resource/1529 Justice Education Society: Workbook for parents separated with children on dealing with finances]
* [http://www.clicklaw.bc.ca/resource/1639 Legal Services Society’s Family Law Website: How to divide property and debts]

{{REVIEWED | reviewer = [[Matthew Ostrow]], October 1, 2018}}

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