Dividing Property and Debts: Difference between revisions

From Clicklaw Wikibooks
Jump to navigation Jump to search
 
(29 intermediate revisions by 5 users not shown)
Line 1: Line 1:
{{DEMOWARNING}}
{{REVIEWEDPLS | reviewer = [http://bhmlawyers.ca/team-2/samantha-rapoport/ Samantha Rapoport], Brown Henderson Melbye|date= March 2020}} {{Dial-A-Law TOC|expanded = divorce}}
{{Dial-A-Law Blurb}}
When a relationship ends, spouses often have to deal with their property and debt. They have to figure out who gets what and who pays for which debts. Learn what the law says about property and debt division when spouses separate.
This script discusses dividing property and debt between married spouses and unmarried spouses when their relationship breaks down.


==Who is a “spouse”?==
{{PLSStorybox
Property and debt are divided between spouses under the ''Family Law Act''. Under this act, the “spouses” who are entitled to apply for an order dividing property and debt under the act are:
| image = [[File:bruno.png|link=]]
| text      = “When my spouse and I started living together, I owned a condo. During our four-year relationship, we bought some things together and racked up some credit card debt. We just separated a month ago. I learned that we each get to keep what we brought into the relationship. We’ll share paying off the debt and dividing up the stuff we got together during our relationship. Now, we’re making a separation agreement — so far, so good.”<br>– Bruno, Nelson, BC
}}
==What you should know==


*people who are married; and
===There are property and debt division rules===
*people who have lived together in a “marriage-like relationship” for at least two years.
In BC, the [https://www.canlii.org/en/bc/laws/stat/sbc-2011-c-25/latest/sbc-2011-c-25.html#part5 ''Family Law Act''] sets out rules for dealing with property and debt when a couple separates. These rules apply to people who meet this definition of '''spouse''':


Claims for the division of property and debt must be made within two years of the date married spouses are divorced or their marriage is annulled or, for unmarried spouses, the date of their separation.
* they are married, or
* they have lived together in a “marriage-like relationship” with another person for at least two years.


If you don’t qualify as a “spouse”, the laws that apply to your situation are different, and this script does not apply to you. You should refer to script [[Your Income, Support and Property Rights (Script 148)|148]] on “Other Relationships: Your Income, Support and Property Rights”.
People who lived together for '''less than two years''' are '''not''' spouses for the purpose of property and debt division. This is true whether they've ''had a child together or not''.


==The basic principles of the ''Family Law Act''==
{| class="wikitable"
The law about dividing property and debt is contained in the ''Family Law Act''. In general:
|align="left"|'''Tip'''
If you are in a relationship but don’t meet the above definition of spouse, different rules apply. [[Couples Who Are Not Spouses: Your Income, Support and Property Rights|See our information for couples who aren't spouses]].
|}


*Each spouse is entitled to keep the property they brought into the relationship, plus certain kinds of property received during the relationship, like inheritances and court awards, as his or her “excluded property.”
===Family property is equally divided between spouses===
*Each spouse is entitled to one-half of the property bought during their relationship, plus one-half of the increase in value of each other’s excluded property. The property spouses are entitled to share is called “family property.”
'''Family property''' is everything you or your spouse own separately or together at the date of separation. But it '''doesn’t''' include '''excluded property'''. This is typically property that one of you owned '''before''' your relationship. We discuss this below.
*Each spouse is liable for one-half of the debt run up during the relationship, including any debt incurred after separation to maintain family property. The debt spouses are obliged to share is called “family debt”.


==What is “family property”?==
The starting point for separation is that family property is '''equally divided''' between spouses. It doesn’t matter whose name the property was in, who used it, or who contributed to it.
Family property is all of the property owned by either or both spouses on the date of separation, minus any excluded property. Family property includes: interests in companies, partnerships and businesses; money owed to a spouse; bank accounts, RRSPs and pensions; and, interests in certain kinds of trusts. Family property includes the amount of the increase in value of any excluded property.


Each spouses is presumed to have a one-half interest in all family property, regardless of their use of or contribution to that property.
Family property can include:


==What is “excluded property”?==
* real property (such as land, buildings, and houses, including the family home)
Excluded property is the property a spouse brings into a relationship, including some kinds of property received during the relationship. Excluded property received after a relationship starts includes, inheritances and gifts from people other than the other spouse; court awards; insurance money; and, interests in certain kinds of trusts. Excluded property includes property bought with excluded property.
* companies or businesses
* insurance policies
* money owed to a spouse (such as an income tax refund)
* bank accounts and investments
* retirement savings accounts (such as RRSPs)
* pensions


Excluded property is presumed to remain the property of the spouse that owns it.
===Each spouse keeps their own excluded property===
[https://www.canlii.org/en/bc/laws/stat/sbc-2011-c-25/latest/sbc-2011-c-25.html#sec85_smooth Under BC law], '''excluded property''' is:


==What is “family debt”?==
* property a spouse '''brought into''' the relationship
Family debt is all debt run up by either or both spouses during their relationship. Family debt includes debt run up after separation if the debt was incurred to pay for or maintain family property.
* certain kinds of property a spouse receives '''during''' the relationship, including a gift from someone else, an inheritance, or a court award
* property bought with excluded property during the relationship


Spouses are presumed to have a one-half responsibility for family debt, regardless of their contribution to the debt or the use that was made of it.
Excluded property belongs to the spouse who brought it into the relationship. But if its value goes up during the relationship, that '''increase''' becomes family property and will be equally divided.


==Are RRSPs and pensions family property?==
====Dividing excluded property====
Yes. The amount of any RRSPs or pensions that accumulated during the relationship is family property. There are special rules in the ''Family Law Act'' for dividing most kinds of pension. There are separate rules for dividing of other pensions and Canada Pension Plan credits that aren’t found in the ''Family Law Act''. A lawyer can help with this.
Spouses can decide to share their excluded property when they separate. They can make an agreement that it will be treated like family property. They can agree that it will be divided between them. This agreement can be made during, or at the beginning or end, of their relationship.


==Are shares in a company family property?==
If one spouse wants to divide excluded property and the other doesn’t, a court can decide to do so. That is, the law says that a spouse can keep their excluded property. But a court ''can'' divide excluded property to make sure each spouse gets what’s fair. Excluded property can be divided if:
Yes. A spouse’s shares in a company are family property. This can be a complicated issue and you should speak to a lawyer if you or your spouse has an interest in a company.


==Is an inheritance family property?==
* family property or family debt '''outside''' British Columbia can’t be divided, or
No. An inheritance that a spouse receives before, during or after a relationship is part of that spouse’s excluded property. However, for inheritances received before separation the amount the inheritance increased in value during the relationship is family property.
* it would be '''significantly unfair''' not to divide excluded property, considering:
** how long the spouses’ relationship is, and
** how much the non-owning spouse directly contributed to it.


==What happens if a spouse tries to hide or sell property?==
{| class="wikitable"
The court can prevent the transfer of property to a third person if the court believes that the transfer is being made to avoid the other spouse’s interest in that property. The court can also reverse a transfer that’s already occurred, whether before or after separation, and make a “compensation order” to repay a spouse for property that was transferred to frustrate the spouse’s interest in that property.
|align="left"|'''Tip'''
What property qualifies as excluded property can sometimes be confusing. If you aren’t sure whether or not something is excluded property, you should get legal advice from a family lawyer.
|}


==Are there any exceptions to the equal division rule?==
===Family debt is equally shared by spouses===
Yes. If an equal division of family property or family debt would be significantly unfair, the court can order a division that is unequal. Although the presumption of an equal division of family property and family debt is very strong, the court’s main duty is to ensure that property is divided fairly.
'''Family debt''' is all debt that '''one or both''' spouses took on during their relationship. It includes mortgages, lines of credit, and credit cards. Family debt may include debt run up '''after''' separation. This is true if a spouse spent money to pay for or take care of family property.


==What does the court look at when dividing family property or family debt unequally?==
Family debt is '''shared equally''' between spouses, regardless of whose name the debt is in or who ran it up. Spouses can make a different agreement about sharing family debt if they don’t want to divide it equally.
The factors the court will take into account in determining whether an equal division would be significantly unfair include: the length of the spouses’ relationship; whether debt was incurred in the normal course of the spouses’ relationship and whether the amount of debt exceeds the amount of property; whether a spouse caused a significant increase or decrease in the value of debt or property after separation; and whether taxes must be paid to divide family property between the spouses.


==Can spouses agree to an unequal division of family property and family debt?==
===Unequal division of family property and family debt===  
Yes. Spouses can agree to an unequal division of property and debt in a separation agreement or by an order that they both agree the court should make, called a “consent order,” or they might have made a marriage agreement or cohabitation sorting out their interests in excluded property or family property when they got married or began to live together.
Most of the time, a court will order that family property and family debt be divided equally. But, [https://www.canlii.org/en/bc/laws/stat/sbc-2011-c-25/latest/sbc-2011-c-25.html#sec95_smooth under BC law], a court can divide property unequally. This can happen if it would be '''significantly unfair''' to equally divide family property or family debt.


The court cannot order a division of property and debt different than a valid marriage agreement or cohabitation agreement requires unless the agreement is overruled. For more information on marriage agreements and cohabitation agreements, refer to script [[Marriage Agreements and Cohabitation Agreements (Script 162)|162]] on “Marriage Agreements and Cohabitation Agreements”.
When might an equal division be significantly unfair? To decide, a court looks at many factors, including:


==Can the court divide excluded property?==
* how long the spouses’ relationship was
Yes. Although the presumption that a spouse should be entitled to keep his or her excluded property is very strong, the court can divide excluded property if: family property or family debt outside British Columbia cannot be divided; or if it would be significantly unfair not to divide excluded property considering the length of the spouses’ relationship and the non-owning spouse’s direct contribution to the excluded property.
* whether the debt was incurred in the normal course of that relationship
* if the family debt is more than the value of family property
* the ability of each spouse to pay a share of the family debt
* if a spouse did something after separation to significantly increase or decrease the value of the property or debt
* if a spouse has to pay taxes because of a property transfer


==Can spouses agree to divide excluded property?==
====Spouses can agree to unequal division of family property and debt====
Yes. Spouses can make an agreement at the start or end of their relationship that excluded property will be treated like family property and be divided between them.
Spouses can agree to divide family property and debt unequally. They can do this:


==When does each spouse get their share of the family property and become responsible for the family debt?==
* in a separation agreement
On the date the spouses separate, each spouse becomes a one-half owner of all family property as a tenant in common, and each becomes responsible for one-half of the family debt.
* by agreement in a court order called a '''consent order'''
* in a marriage agreement, made before or during marriage
* in a cohabitation agreement, made before or while living together


==When do you have to apply for a division of property and debt?==
Courts respect agreements about property and debt division. They will enforce them as long as the agreements are fair. For more, [[Separation and Separation Agreements|see our information on separation agreements]] and [[Marriage Agreements and Cohabitation Agreements|marriage and cohabitation agreements]].
It isn’t necessary to start a court case to divide property or debt, and you don’t need to get a divorce order first if you’re married. However, if an agreement about dividing property and debt can’t be reached:


*married spouses must apply to court for a division of property and debt under the ''Family Law Act'' within two years of the date the that court made a divorce order or a declaration that their marriage is a nullity; and
==Common questions==
*unmarried spouses must apply to court for a division of property and debt under the act within two years of the date they separated.


==Summary==
===When are family property and family debt divided?===
When married or unmarried spouses separate, each spouse is entitled to an interest in all family property and becomes responsible for all family debt. Normally the interest in family property is a half interest and the liability for family debt is for one-half of that debt; the spouses’ interests might be unequal if an equal share would be significantly unfair. Each spouse will usually keep his or her excluded property, but will have to share half of the amount that the excluded property increased in value during the spouses’ relationship.
Family property and family debt are divided as of the '''date the spouses separate'''. On their separation date, each spouse becomes:


Because the division of family property and family debt raises some very complex legal issues, it’s important to get legal advice immediately. With proper advice and help, it’s often possible to settle the division of property and debt without having to go to court.
* a half-owner of all family property as a tenant-in-common (where a person owns a specific share in the property)
* responsible for half of the family debt


==More information==
===Is an inheritance family property?===
For more information about family property, excluded property and family debt, see the [[Property & Debt in Family Law Matters|property and debt section]] of the wikibook JP Boyd on Family Law provided by Courthouse Libraries BC.
Generally speaking, no. An inheritance that a spouse receives before or during a relationship is part of that spouse’s '''excluded property'''. But if an inheritance increases in value during the relationship, that '''increase''' is family property.


Also, in some unique circumstances, an inheritance can lose its excluded status. If an inheritance is in play, you should get legal advice from a family lawyer.


----
===Are RRSPs and pensions family property?===
----
Yes. Any registered retirement savings plans (RRSPs) or benefits in a pension plan that each spouse built up during the relationship is family property. The law has special rules for dividing most kinds of pension plans. There are separate rules for dividing Canada Pension Plan credits and other pensions not found in the ''Family Law Act''.


{| class="wikitable"
|align="left"|'''Tip'''
Dividing pensions is complicated. You should get help from a lawyer with this. In the meantime, the Family Law in BC website from Legal Aid BC has [https://family.legalaid.bc.ca/finances-support/property-debt/dividing-pensions-and-other-benefits-after-you-separate information about dividing pensions and other benefits].
|}


===What happens if a spouse tries to hide or sell property?===
If a spouse tries to limit or interfere with the other spouse’s property interest, a court can:
* stop the property from being transferred to a third person
* reverse a transfer that’s already occurred, whether before or after separation
* make a '''compensation order''' to the other spouse
===Do I have to go to court?===
You don’t have to start a court case to divide property or debt. Also, if you’re married, you don’t need to get a divorce order first. You and your spouse can make an agreement to divide property and debt.
But if you and your spouse can’t agree, you’ll need to apply to court for an order dividing property and debt. There’s a '''deadline''' for starting this action. You have to start it '''two years''' from the date of divorce (for married spouses) or the '''date of separation''' (for unmarried spouses).
==Who can help==
===With more information===
The '''Family Law in BC website''' from Legal Aid BC has information about dealing with property and debt when spouses separate.
* [https://familylaw.lss.bc.ca/finances-support/property-debt Visit website]
The '''BC government''' website explains how separated couples can deal with property and debt.
* [https://www2.gov.bc.ca/gov/content/life-events/divorce/family-justice/family-law/dealing-with-property-and-debt Visit website]
The wikibook ''JP Boyd on Family Law'', hosted by Courthouse Libraries BC, has in-depth coverage of family property, excluded property, and family debt.
* [https://wiki.clicklaw.bc.ca/index.php/Property_&_Debt_in_Family_Law_Matters Visit website]
===Free and low-cost legal help===
The '''Family LawLINE''', operated by Legal Aid BC, is staffed with lawyers who provide free family law legal advice over the telephone to people who can’t afford a lawyer.
* Call 604-408-2172 (Metro Vancouver) or 1-866-577-2525 (toll-free)
* [https://familylaw.lss.bc.ca/call/family-lawline Visit website]
[[Free and Low-Cost Legal Help|Also see our information on free and low-cost legal help]]. It explains options such as pro bono services, legal clinics, and advocates.
{{Dial-A-Law_Navbox|type=families}}
{{Dial-A-Law Copyright}}
{{Dial-A-Law Copyright}}

Latest revision as of 03:59, 13 May 2021

This information applies to British Columbia, Canada. Last reviewed for legal accuracy by Samantha Rapoport, Brown Henderson Melbye in March 2020.
Dial-A-Law
Dial-A-Law‎
This page is
from Dial-A-Law‎,
a starting point for
information on the law
in British Columbia.
See the full contents.
About
Introduction
Consumer & Money
Work & Business
Families & Children
Divorce & Separation
 · Separation & Separation Agreements

 · Deciding Who Will Move Out

 · Requirements for Divorce & Annulment

 · Desk Order Divorce

 · Responding to Divorce Proceedings

 · Guardianship & Parenting Arrangements

 · Child Support

 · Spousal Support

 · Enforcing Support Orders & Agreements

 · Tax Implications of Support Payments

 · Dividing Property & Debts
Life
Courts & Crime
From
Visit more from People's Law School
People's Law School
People's Law School
v • d • e

When a relationship ends, spouses often have to deal with their property and debt. They have to figure out who gets what and who pays for which debts. Learn what the law says about property and debt division when spouses separate.

“When my spouse and I started living together, I owned a condo. During our four-year relationship, we bought some things together and racked up some credit card debt. We just separated a month ago. I learned that we each get to keep what we brought into the relationship. We’ll share paying off the debt and dividing up the stuff we got together during our relationship. Now, we’re making a separation agreement — so far, so good.”
– Bruno, Nelson, BC

What you should know

There are property and debt division rules

In BC, the Family Law Act sets out rules for dealing with property and debt when a couple separates. These rules apply to people who meet this definition of spouse:

  • they are married, or
  • they have lived together in a “marriage-like relationship” with another person for at least two years.

People who lived together for less than two years are not spouses for the purpose of property and debt division. This is true whether they've had a child together or not.

Tip

If you are in a relationship but don’t meet the above definition of spouse, different rules apply. See our information for couples who aren't spouses.

Family property is equally divided between spouses

Family property is everything you or your spouse own separately or together at the date of separation. But it doesn’t include excluded property. This is typically property that one of you owned before your relationship. We discuss this below.

The starting point for separation is that family property is equally divided between spouses. It doesn’t matter whose name the property was in, who used it, or who contributed to it.

Family property can include:

  • real property (such as land, buildings, and houses, including the family home)
  • companies or businesses
  • insurance policies
  • money owed to a spouse (such as an income tax refund)
  • bank accounts and investments
  • retirement savings accounts (such as RRSPs)
  • pensions

Each spouse keeps their own excluded property

Under BC law, excluded property is:

  • property a spouse brought into the relationship
  • certain kinds of property a spouse receives during the relationship, including a gift from someone else, an inheritance, or a court award
  • property bought with excluded property during the relationship

Excluded property belongs to the spouse who brought it into the relationship. But if its value goes up during the relationship, that increase becomes family property and will be equally divided.

Dividing excluded property

Spouses can decide to share their excluded property when they separate. They can make an agreement that it will be treated like family property. They can agree that it will be divided between them. This agreement can be made during, or at the beginning or end, of their relationship.

If one spouse wants to divide excluded property and the other doesn’t, a court can decide to do so. That is, the law says that a spouse can keep their excluded property. But a court can divide excluded property to make sure each spouse gets what’s fair. Excluded property can be divided if:

  • family property or family debt outside British Columbia can’t be divided, or
  • it would be significantly unfair not to divide excluded property, considering:
    • how long the spouses’ relationship is, and
    • how much the non-owning spouse directly contributed to it.
Tip

What property qualifies as excluded property can sometimes be confusing. If you aren’t sure whether or not something is excluded property, you should get legal advice from a family lawyer.

Family debt is equally shared by spouses

Family debt is all debt that one or both spouses took on during their relationship. It includes mortgages, lines of credit, and credit cards. Family debt may include debt run up after separation. This is true if a spouse spent money to pay for or take care of family property.

Family debt is shared equally between spouses, regardless of whose name the debt is in or who ran it up. Spouses can make a different agreement about sharing family debt if they don’t want to divide it equally.

Unequal division of family property and family debt

Most of the time, a court will order that family property and family debt be divided equally. But, under BC law, a court can divide property unequally. This can happen if it would be significantly unfair to equally divide family property or family debt.

When might an equal division be significantly unfair? To decide, a court looks at many factors, including:

  • how long the spouses’ relationship was
  • whether the debt was incurred in the normal course of that relationship
  • if the family debt is more than the value of family property
  • the ability of each spouse to pay a share of the family debt
  • if a spouse did something after separation to significantly increase or decrease the value of the property or debt
  • if a spouse has to pay taxes because of a property transfer

Spouses can agree to unequal division of family property and debt

Spouses can agree to divide family property and debt unequally. They can do this:

  • in a separation agreement
  • by agreement in a court order called a consent order
  • in a marriage agreement, made before or during marriage
  • in a cohabitation agreement, made before or while living together

Courts respect agreements about property and debt division. They will enforce them as long as the agreements are fair. For more, see our information on separation agreements and marriage and cohabitation agreements.

Common questions

When are family property and family debt divided?

Family property and family debt are divided as of the date the spouses separate. On their separation date, each spouse becomes:

  • a half-owner of all family property as a tenant-in-common (where a person owns a specific share in the property)
  • responsible for half of the family debt

Is an inheritance family property?

Generally speaking, no. An inheritance that a spouse receives before or during a relationship is part of that spouse’s excluded property. But if an inheritance increases in value during the relationship, that increase is family property.

Also, in some unique circumstances, an inheritance can lose its excluded status. If an inheritance is in play, you should get legal advice from a family lawyer.

Are RRSPs and pensions family property?

Yes. Any registered retirement savings plans (RRSPs) or benefits in a pension plan that each spouse built up during the relationship is family property. The law has special rules for dividing most kinds of pension plans. There are separate rules for dividing Canada Pension Plan credits and other pensions not found in the Family Law Act.

Tip

Dividing pensions is complicated. You should get help from a lawyer with this. In the meantime, the Family Law in BC website from Legal Aid BC has information about dividing pensions and other benefits.

What happens if a spouse tries to hide or sell property?

If a spouse tries to limit or interfere with the other spouse’s property interest, a court can:

  • stop the property from being transferred to a third person
  • reverse a transfer that’s already occurred, whether before or after separation
  • make a compensation order to the other spouse

Do I have to go to court?

You don’t have to start a court case to divide property or debt. Also, if you’re married, you don’t need to get a divorce order first. You and your spouse can make an agreement to divide property and debt.

But if you and your spouse can’t agree, you’ll need to apply to court for an order dividing property and debt. There’s a deadline for starting this action. You have to start it two years from the date of divorce (for married spouses) or the date of separation (for unmarried spouses).

Who can help

With more information

The Family Law in BC website from Legal Aid BC has information about dealing with property and debt when spouses separate.

The BC government website explains how separated couples can deal with property and debt.

The wikibook JP Boyd on Family Law, hosted by Courthouse Libraries BC, has in-depth coverage of family property, excluded property, and family debt.

Free and low-cost legal help

The Family LawLINE, operated by Legal Aid BC, is staffed with lawyers who provide free family law legal advice over the telephone to people who can’t afford a lawyer.

  • Call 604-408-2172 (Metro Vancouver) or 1-866-577-2525 (toll-free)
  • Visit website

Also see our information on free and low-cost legal help. It explains options such as pro bono services, legal clinics, and advocates.

v • d • e
 
Families & Children
Family Relationships
Divorce & Separation
Children
Resolving Family Disputes
Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International Licence Dial-A-Law © People's Law School is licensed under a Creative Commons Attribution - NonCommercial - ShareAlike 4.0 International Licence.


Retrieved from "https://wiki.clicklaw.bc.ca/index.php?title=Dividing_Property_and_Debts&oldid=49342"