Difference between revisions of "Basic Principles of Property and Debt in Family Law"

People 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 are entitled to keep any property they each brought into the relationship. The same thing goes for debt. Spouses are presumed to be equally responsible for debt accumulating during the relationship but be separately responsible for any debt that they had going into the relationship.

==Introduction==

<blockquote><tt>(2) A spouse includes a former spouse.</tt></blockquote>

Under s. 81(a) of the ''Family Law Act'', spouses are presumed to each be entitled to share in ''family property''. Family property is defined at s. 84(1) as:

As you can see, the dates when "the relationship between the spouses began" and the date "the spouses separate" are very important. They 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.

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

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.

<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"?

Separation usually happens when one spouse decides that the relationship cannot continue, says so and then takes steps to end the partnership-like qualities of the relationship, usually by stopping sleeping together, stopping doing chores for the other person, stopping going out together as a couple and so on. Section 3(4) offers some guidance on when a spousal relationship ends.

It's easy to imagine that the date of separation could be argued about, especially if the spouses reconciled for a bit or if a spouse's commitment to ending the partnership-like aspect of a relationship wavered from time to time. In order to avoid spending money on lawyers arguing about this issue, you might consider documenting the date of separation in some way, perhaps by sending a letter or an email to your spouse stating your intention to separate. Do remember to keep a copy.

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:

#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".

The scheme for the division of property under the ''Family Law Act'' is technically 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.

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.

The ''Family Law Act'' became law in British Columbia on 18 March 2013. All of the parts of the act about children and support applied to everyone right away, including people who were in the middle of a court proceeding. However, under s. 252(2) married spouses who had started a court proceeding about the division of property or had an agreement about the division of property must continue under the old ''Family Relations Act'' as if it hadn't been cancelled, unless the spouses agree otherwise:

The division of family property under the ''Family Relations Act'' is discussed later on in this page.

The general rule about how property and debt are divided under the ''Family Law Act'' is found in s. 81:

The rest of Part 5 concerns:

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 when a spouse trades in the old family Ford Windstar as the down payment for shiny new Porsche Boxster. The Windstar was family property that both spouses have an interest in; since the Boxster was bought with the family property, it too is family property that both spouses have an interest in.

Boiling this all down somewhat, family property includes:

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.

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 when if a spouse takes out a loan to make the mortgage payments on the family home. Since family home family property, the loan is a family debt that both spouses are responsible for.

When a ''triggering event'' happens, 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.

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".

Because each owner's interest is separate from the other owners, a tenant in common can sell his or her share in the asset to someone else, put a mortgage on his or her interest or use it as collateral, or give it to someone else as a gift. If a tenant in common dies, his or her interest in the thing becomes a part of his or her estate to be distributed according to his or her will.

Family law lawyers describe the effect of a triggering event as "crystallizing" the spouses' interests in the family property because the triggering event 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 triggering event 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 triggering event.

Under s. 81(b), the one triggering event under the ''Family Law Act'' is the ''date of separation'':

If this sounds odd to you, it's probably because the old ''Family Relations Act'' had four triggering events:

#the signing of a separation agreement.

Under the ''Family Law Act'' there is just one triggering event, and it does not require the parties to start a court proceeding or to sign an agreement.

Although pool of family property to be shared between spouses is crystallized when the triggering event happens, under s. 87(b), ''value'' of the 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 even take a number of months to finish an agreement for the division of property.

Under s. 87(a), the value of property is its ''fair market value'', 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.

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''.  

To boil all this down, a spouse's excluded property is all 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:

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 spouse's excluded property because is 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''.

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. Gather the documents listed below for the period which spans the date on which you and your spouse began to live together or got married, whichever is earlier:

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, especially ones that you've sold.

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:

Remember, under s. 85(2) its up to the person claiming that property is excluded property to prove it.

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:

For awhile longer it's going to be important to know to know how family property is divided under the ''Family Relations Act''.

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.

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:

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 persion with legal title to the asset, which might be:

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.

Section 56(1) of the ''Family Relations Act'' described four triggering events:

#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.

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 which could be challenged. When assets were divided more in one spouse's favour than the other, the assets were said to have been ''reapportioned''.  

Family assets were most commonly reapportioned when:

===Defining "Family Assets"===

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'' are agreements signed by people who will be or are living together, who may or may not wind up getting married later on down the road. ''Marriage agreements'' are signed by people who will be getting or are married. Although there's no reason why these agreements can't be signed well into a relationship, they're usually signed at or shortly after the date the parties begin to live together or marry.

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:

I'm sure there are options as well.