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

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

The ''end date'' for the accumulation of family property is presumed to be the date of separation. The ''start date'' is the date the spouses' relationship begins, and is found in the definition of ''excluded property'' at s. 85:

The start date and the end date with respect to the accumulation of ''family debt'' is stated more simply in s. 86:

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."

Under the ''Family Law Act'', use is irrelevant. In fact that's exactly what s. 81(a) says:

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

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 if a spouse uses money from a joint bank account to buy a new car, after separation, the new car will be family property.  Simply stated, if the original source of the funds used to purchase a new asset after separation is from family property (i.e. use tracing provisions), the new asset will also be found to be family property even though the new asset was purchased after separation.  As well, if a spouse owns real property with a third party(i.e. with a parent) that portion of the real property that is registered in the spouse's name may be found to be family property, subject always to trust claims made by the third party.

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.

The definition of family debt is at s. 86 and is much shorter:

Although the pool of family property to be shared between spouses is crystallized when the separation happens, under s. 87(b), the ''value'' of the family 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 take four or five months to finish an agreement for the division of property.  With respect to daily use bank accounts (i.e. bank account where your pay is deposited and you pay your monthly bills), it has become more common for the court to value such bank accounts based on its value as at the date of separation instead of the date of the trial or agreement.  

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

Excluded property is defined at s. 85(1):

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 that spouse's excluded property because it was 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''.

However, where a married person puts what would be excluded property in the name of the other spouse, it may be that the excluded property becomes family property. Similarly, where a parent gives money or property during the relationship, it is open to the son-in-law or daughter-in-law, or the common law spouse, to argue that it was a gift to the couple and is not excluded property.  The law in this area is in flux (as there are currently two lines of authority), so it is difficult to give a definitive answer as to what law applies.  Even lawyers find this area of law difficult, so do not be upset if you are confused about this area of law.

Remember, under s. 85(2) it's up to the person claiming that the 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:

As long as an asset qualified under the act as a ''family asset'', each spouse was presumed to have a one-half interest in that asset. Family assets were defined in s. 58(2) of the act, and the focus under the act was on how an asset was ''used during the relationship'' rather than on who bought it, when it was bought, or how it was bought:

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 that 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 defined in s. 58 of the ''Family Relations Act'' as:

These agreements are often used to say how property and debt will be handled during a relationship and how it will be allocated if the couple separates. Under s. 93(1) of the ''Family Law Act'', they must be in writing and be signed by each spouse in the presence of at least one other person as a witness.  It is highly recommended that you both obtain independent legal advice from a lawyer (do not use the same lawyer, each must have a separate lawyer) before signing such an agreement to ensure that each party fully understands the nature and circumstances of the agreement and what is being given up.