Dividing Property and Debts (Script 124)

From Clicklaw Wikibooks

When a relationship ends, spouses are presumed to keep property they brought into the relationship and to share in property they acquired during their relationship. The same goes for debt.

Understand your legal rights

The rules around property division apply to “spouses”

In BC, the Family Law Act deals with the division of property and debt when a couple separates. This law applies to people who are spouses. A spouse is defined as:

  • people who are married, or
  • people who have lived together in a “marriage-like relationship” for at least two years.

Spouses are presumed to keep the property each of them brought into the 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.

If you don’t qualify as a spouse, the laws that apply to your situation are different. See our information for couples who are not spouses (no. 148).

Each spouse is presumed to keep certain “excluded” property

Under BC law, certain property is defined as “excluded property”. Property a spouse brought into the relationship is excluded property. So is certain kinds of property a spouse received during the relationship, such as a gift from someone else, an inheritance, or a court award. Property bought with excluded property is excluded property.

Excluded property is presumed to remain the property of the spouse who brought it into the relationship or received it. (However, any increase in value of excluded property during the relationship becomes family property and is shared.)

Tip

Courts have frequently grappled with what property qualifies as excluded property. If you have property that may be excluded property, it is highly advisable to get legal advice from a family law lawyer.

Each spouse is presumed to share equally in “family property”

All property owned by either or both spouses at the date of separation is family property unless it is excluded property. Family property is presumed to be shared equally between the spouses, regardless of their use of or contribution to that property.

Family property can include real property, interests in companies or businesses, money a spouse is owed (such as an income tax refund), bank accounts, retirement savings accounts, and pensions. Family property also includes any increase in the value of excluded property during the relationship.

Each spouse is presumed to have a one-half interest in all family property, regardless of their use of or contribution to that property.

Each spouse is presumed to share equally in “family debt”

All debt incurred by either or both spouses during their relationship 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.

Family debt includes debt run up after separation if the debt was incurred to pay for or maintain family property.

There are exceptions to the equal division rule

Under BC law, if it would be significantly unfair to equally divide family property or family debt, a court may order an unequal division. The presumption of an equal division of family property and family debt is very strong. The unfairness must be "weighty, meaningful or compelling".

In considering whether an equal division would be significantly unfair, a court will look at factors such as:

  • the length of the spouses’ relationship
  • whether the debt was incurred in the normal course of the spouses’ relationship
  • 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
  • whether a spouse, after separation, caused a significant increase or decrease in the value of debt or property
  • whether a spouse may have to pay taxes as a result of a transfer of property

Common questions

Are RRSPs and pensions family property?

Yes. The amount of any Registered Retirement Savings Plans (RRSPs) or pensions that each spouse accumulated during the relationship is family property. There are special rules in the Family Law Act for dividing most kinds of pension plans. There are separate rules for dividing other pensions and Canada Pension Plan credits that are not found in the Family Law Act. A lawyer can help with this.

Are shares in a company family property?

Yes. A spouse’s shares in a company are family property. This can be a complicated issue and it is highly advisable to speak to a lawyer if you or your spouse has an interest in a company.

Is an inheritance family property?

Generally speaking, no. An inheritance that a spouse receives before, during or after a relationship is part of that spouse’s excluded property. In some unique circumstances, an inheritance can lose its excluded status. If an inheritance is in play, it is advisable to get legal advice from a family law lawyer. As well, note that any amount an inheritance increased in value during the relationship is family property.

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

A court can prevent the transfer of property to a third person if the court believes the transfer is being made to limit or interfere with the other spouse’s interest in the 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 transferred to frustrate the spouse’s interest in the property.

Can spouses agree to an 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 a court order called a “consent order”. Also, they might have made a marriage agreement when they got married (or cohabitation agreement when they began to live together) sorting out their interests in excluded property or family property.

Courts respect agreements about property and debt division and will uphold them as long as the agreements are fair. For more on family law agreements, see our information on separation agreements (no. 115) and marriage and cohabitation agreements (no. 162).

Can a court divide excluded property?

Yes, in some cases. The presumption that a spouse should be entitled to keep their excluded property is very strong. But a court can divide excluded property if:

  • family property or family debt outside British Columbia cannot be divided, or
  • 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.

Can spouses agree to divide excluded property?

Yes. Spouses can make an agreement at the start, during or end of their relationship that excluded property will be treated like family property and be divided between them.

On what date does family property and family debt get divided?

On the date the spouses separate, each spouse becomes a one-half owner of all family property as a tenant-in-common, and each spouse becomes responsible for one-half of the family debt.

Do I need to go to court?

It is not necessary to start a court case to divide property or debt, and (if you’re married) you do not need to get a divorce order first. You can make an agreement to divide property and debt.

However, if you and your spouse can’t agree on how to divide property and debt, you will need to apply to court for an order dividing property and debt. A claim to divide property and debt must be brought within two years of the date of divorce (for married spouses) or date of separation (for unmarried spouses).

Get help

With more information

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

Web: wiki.clicklaw.bc.ca


[updated May 2017]

The above was last reviewed for legal accuracy by Zahra H. Jimale, Jimale Law Corporation.



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