Difference between revisions of "Dividing Property and Debts"

From Clicklaw Wikibooks
Jump to navigation Jump to search
 
(8 intermediate revisions by the same user not shown)
Line 1: Line 1:
{{REVIEWEDPLS | reviewer = [http://jimalelawcorp.com/about-zahra/ Zahra H. Jimale], Jimale Law Corporation|date= May 2017}} {{Dial-A-Law TOC|expanded = divorce}}
{{REVIEWEDPLS | reviewer = [http://bhmlawyers.ca/team-2/samantha-rapoport/ Samantha Rapoport], Brown Henderson Melbye|date= March 2020}} {{Dial-A-Law TOC|expanded = divorce}}
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'''.
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.


==Understand your legal rights==
{{PLSStorybox
| 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==


===The rules around property division apply to “spouses”===  
===There are property and debt division rules===  
In BC, the ''[http://canlii.ca/t/8q3k 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:
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''':
*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.
* 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. See our information for [[Couples Who Are Not Spouses: Your Income, Support and Property Rights (No. 148)|couples who are not spouses (no. 148)]].  
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''.


===Each spouse is presumed to keep certain “excluded” property===  
{| class="wikitable"
Under [https://www.canlii.org/en/bc/laws/stat/sbc-2011-c-25/latest/sbc-2011-c-25.html#sec85_smooth 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.
|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]].
|}
 
===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===
[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:
 
* 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.


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.)
====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.


{| class="wikitable"
{| class="wikitable"
|align="left"|'''Tip'''
|align="left"|'''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.
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.
|}
|}


===Each spouse is presumed to share equally in “family property”===
===Family debt is equally shared by spouses===
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 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 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.  
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.


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


===Each spouse is presumed to share equally in “family debt”===
When might an equal division be significantly unfair? To decide, a court looks at many factors, including:
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.
* 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


===There are exceptions to the equal division rule===  
====Spouses can agree to unequal division of family property and debt====
Under [https://www.canlii.org/en/bc/laws/stat/sbc-2011-c-25/latest/sbc-2011-c-25.html#sec95_smooth 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".
Spouses can agree to divide family property and debt unequally. They can do this:


In considering whether an equal division would be significantly unfair, a court will look at factors such as:
* in a separation agreement
*the length of the spouses’ relationship
* by agreement in a court order called a '''consent order'''
*whether the debt was incurred in the normal course of the spouses’ relationship
* in a marriage agreement, made before or during marriage
*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
* in a cohabitation agreement, made before or while living together
*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
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]].


==Common questions==
==Common questions==


===Are RRSPs and pensions family property?===
===When are family property and family debt divided?===
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.
Family property and family debt are divided as of the '''date the spouses separate'''. On their separation date, each spouse becomes:


===Are shares in a company family property?===
* a half-owner of all family property as a tenant-in-common (where a person owns a specific share in the 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.
* responsible for half of the family debt


===Is an inheritance family property?===
===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.
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?===
===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.
If a spouse tries to limit or interfere with the other spouse’s property interest, a court can:


===Can spouses agree to an unequal division of family property and family debt?===
* stop the property from being transferred to a third person
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.
* reverse a transfer that’s already occurred, whether before or after separation
* make a '''compensation order''' to the other spouse


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 and Separation Agreements (No. 115)|separation agreements (no. 115)]] and [[Marriage Agreements and Cohabitation Agreements (No. 162)|marriage and cohabitation agreements (no. 162)]].
===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.


===Can a court divide excluded property?===
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).
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?===
==Who can help==
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?===  
===With more information===
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.
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]


===Do I need to go to court?===
The wikibook ''JP Boyd on Family Law'', hosted by Courthouse Libraries BC, has in-depth coverage of family property, excluded property, and family debt.
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).
* [https://wiki.clicklaw.bc.ca/index.php/Property_&_Debt_in_Family_Law_Matters Visit website]


==Get help==
===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.


===With more information===
* Call 604-408-2172 (Metro Vancouver) or 1-866-577-2525 (toll-free)
The wikibook '''''JP Boyd on Family Law''''', hosted by Courthouse Libraries BC, has indepth coverage of family property, excluded property, and family debt.
* [https://familylaw.lss.bc.ca/call/family-lawline Visit website]
:Web: [http://wiki.clicklaw.bc.ca/index.php/Property_%26_Debt_in_Family_Law_Matters wiki.clicklaw.bc.ca]
 
[[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_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
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.

Bruno.png
“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://stagewiki.clicklaw.bc.ca/index.php?title=Dividing_Property_and_Debts&oldid=49342"