Assets of Couples (3:IX)
A. General
The FRA only applies to proceedings started prior to March 18, 2013 and to agreements made before the FLA came into force.
The division of property on marriage breakdown is dealt with in Part 5 of both the FRA and the FLA. The FRA creates a basic presumption of equal entitlement to family assets, real and personal property that is ordinarily used for a family purpose. Part 6 deals with the division of pensions. These two parts of the FRA do not apply to common law relationships, although common law partners could contract into the property provisions of the Act. Also, the rights of the parties to family assets may be resolved by agreement, mediation or litigation. All litigation relating to property must be dealt with at the Supreme Court level. The Provincial Court does not have the jurisdiction to deal with assets.
The FLA significantly changes the property law regime in British Columbia, and reduces judicial discretion. It is a simpler model that is designed to help parties achieve resolutions out of Court. Itoperates on the presumption that spouses are equally entitled to family property that is proper and equally responsible for family debt (s 81). It also provides that unmarried spouses (who have lived together in a marriage-like relationship for at least two years) may avail themselves of the property and liability provisions of the Act in Part 5 and 6.
B. Legislation
1. Divorce Act [DA]
The DA does not deal with property division.
2. Family Law Act [FLA]
Section 81 of the FLA outlines that each spouse is entitled to an undivided, one half interest of family property and is equally responsible for debt upon separation (Stonehouse v Stonehouse, 2014 BCSC 1057; Joffres v Joffres, 2014 BCSC 1778). However, the FLA substantially changes what is considered to be family property, essentially allowing spouses to keep property they bring into a relationship and share only in the increase in value of that property and the net value of new property obtained after cohabitation.
The FLA carves out a category of excluded property under section 85. Excluded property is property that may have been included as part of the family assets under the functional test of the FRA: whether it was “ordinarily used” for a “family purpose”. A spouse has no right to property that is not used for a family purpose (Remmem v Remmem, 2014 BCSC 1552). Section 85 (1) of the FLA excludes property acquired by a spouse before the relationship between spouses began (Cabezas v Maxim, 2014 BCSC 767), gifts or inheritances to a spouse (Thomson v Young, 2014 BCSC 799), settlement of award of damages to a spouse as compensation for an injury or loss (unless for both spouses or to compensate for lost income of a spouse), and money paid under an insurance policy other than for property or loss of income. Any increases in the value of the excluded property that occur during therelationship are considered family property and are not excluded from division. Property that fits intothe above categories that is held in trust for the benefit of a spouse and property derived from property or the disposition of property of the above categories is also included in excluded property.The spouse claiming that the property in question qualifies as excluded property is responsible for demonstrating that it is (Bressette v Henderson, 2013 BCSC 1661).
This property division regime applies to all married spouses as well as all unmarried common law spouses who have lived in a marriage-like relationship for at least two years. The date of separation will be the relevant date used to identify the pool of family property to be divided (there is no longer a reference to a “triggering event”). However, it is the date of the hearing or agreement which determines the date of valuation of property. Spouses may choose to opt out of these property division rules but must make these different arrangements through an agreement.
Family property, defined at s 84, is all property owned by either or both spouses, acquired by one of both spouses after the date of cohabitation other than by disposition of excluded assets.
C. Types of Assets
1. Family Assets/ Family Property
Under sections 84 – 85 of the FLA, family property includes all real and personal property owned by one or both spouses at the date of separation unless the asset in question is excluded, in which case only the increase in the value of the asset during the relationship is divisible. It is no longer relevant whether an asset was ordinarily used for a family purpose in deciding if it is family property.
A spouse can choose to prove that property classifies as one of the following exclusions:
- Property acquired before or after the relationship;
- Gifts or inheritances to one spouse
- Section 85(b.1) defines gifts as gifts to a spouse from a third party
- Most damage awards and insurance proceeds, except those intended to compensate both spouses
- Some kinds of trust property
- Under s 85(e), property must be held in trust for the benefit of a spouse
- A spouse's beneficial interest in property held in a discretionary trust to which the spouse did not not contribute, and that is settled by a person other than the spouse are also excluded from family property under s 85 (f)
Family debt, which is new in the FLA, is divided equally, unless equal division would be significantly unfair to one spouse. The value of all property is calculated at either an agreed date, or at the date of a court hearing. Any increases in the value of the excluded property that occur during the relationship are considered family property and are not excluded from division.
2. Savings
Under the FLA, all money held by one spouse in a financial institution is considered family property and equally divisible, unless that spouse can prove that it is excluded property.
3. Pensions and RRSPs
Rights under an annuity, pension, home ownership, or registered retirement savings plan are considered family assets, including each party’s Canadian Pension Plan (C.P.P.) credits.
The division of pensions is clarified in the FLA. Unless the pension is proven to be excluded property, it will be divisible. If a spouse is to receive benefits at a later date, they may become a limited member of the plan. They cease to be a limited member then their share is transferred. A spouse can generally either choose to have a lump-sum payment of their share, to have a separate pension payment issued to them (s 115) or a hybrid of both (s 116). This decision may be made at any time (either before or after the pension commences) but the division will only occur after the pension has commenced (s 115).
If an agreement or order regarding the benefits of a pension provides that the benefits are not divisible or is silent on entitlement to benefits, a member and a spouse may agree to have benefits divided before the earliest of:
- Benefits are divided under the original agreement or order
- The member or spouse dies
- Benefits are terminated under the plan
If an agreement or order provides that the member must pay the spouse a proportionate share of benefits under a plan where the member’s pension commences and the member’s pension has not commenced, the member and spouse may agree, by the spouse giving notice to Division 2 of Part 6 of the FLA, to divide the benefits in accordance with the Part, and unless the member and spouse agree otherwise, the original agreement or order must be administered in accordance with the regulations.
NOTE: BC is one of the few provinces that allow spouses to enter into a written agreement to waive the equalization of their pensionable credits under the CPP.
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