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

Jump to navigation Jump to search

Basic Principles of Property and Debt in Family Law (view source)

Revision as of 22:26, 15 January 2024

18,617 bytes added ,  15 January
From staging 2024
(From staging June 2022)
(From staging 2024)
 
Line 1: Line 1:
{{JP Boyd on Family Law TOC|expanded = assets}}{{JPBOFL Editor Badge
{{JP Boyd on Family Law TOC|expanded = assets}}{{JPBOFL Editor Badge
|CoAuthor = [[Trudy Hopman]]
|ChapterEditors = [[Helen Chiu]] and [[Matthew Ostrow]]
|ChapterEditors = [[Helen Chiu]] and [[Matthew Ostrow]]
}}{{LSSbadge
}}{{LSSbadge
| resourcetype = a fact sheet on
| resourcetype = a fact sheet on
| link = [http://www.clicklaw.bc.ca/resource/1639 How to divide property and debts]
| link = [http://www.clicklaw.bc.ca/resource/1639 How to divide property and debts]
}}Under the ''[[Family Law Act]]'', spouses 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 to keep any property they each brought into the relationship. The same thing goes for debt. Spouses are equally responsible for the debt they accumulated during the relationship, but they are separately responsible for any debt that they had going into the relationship.
}}As we discussed in the overview [[Property and Debt in Family Law Matters]] section of this chapter, the ''[[Family Law Act]]'' says that spouses who are married or who lived together in a marriage-like relationship for at least two years are presumed to:
* keep for themselves any property they brought into the relationship (the ''excluded property''),
* be individually responsible for the debt they brought into the relationship (''excluded debt'' is not a defined term in the Act, but judges sometimes call it that),
* share in the property they acquired during their relationship, plus the value increase of any excluded property during that time (the ''family property''), and
* share responsibility for the debt accumulated during the relationship, including increases to any excluded debt during the relationship (the ''family debt''),


This all sounds pretty straightforward, but there are lots of details that can make the division of property and debt complicated.  
This all sounds pretty straightforward, but there are lots of details that can make the division of property and debt complicated.  


This section talks about how property and debt are divided between spouses under the ''Family Law Act'' and how they used to be divided under the ''[[Family Relations Act]]'', what property is shareable family property, and what property is excluded from division. It also looks at the role marriage agreements and cohabitation agreements can play in controlling the impact of the ''Family Law Act''.
This section talks about how property and debt are divided between spouses under the ''Family Law Act'', how they used to be divided under the ''[[Family Relations Act]]'', and how these two methods or regimes are different. It explains what property is shareable family property, and what property is excluded from division. It also looks at the role marriage agreements and cohabitation agreements can play in controlling the impact of the ''Family Law Act''.


==Introduction==
==Introduction==


The basic plan for the division of property and debt under the provincial ''[[Family Law Act]]'' is pretty straightforward. You keep what you bring into the relationship, and you split what you get and accumulated (i.e. increase in value of excluded property) during the relationship. Of course it's a lot more complicated than this, but that's the basic concept the act is built on.
The basic plan for the division of property and debt under the provincial ''[[Family Law Act]]'' is pretty straightforward. You keep what you bring into the relationship, and you split what you get as well as any value that has accumulated in excluded property (i.e. increase in value of excluded property) during the relationship. Of course it's a lot more complicated than this, but that's the basic concept the ''Family Law Act'' is built on.


Part 5 of the ''Family Law Act'' deals with the division of property and debt, and provides the definitions of ''family property'' and ''family debt'', the things that are presumed to be shared between spouses, and ''excluded property'', which is presumed to remain the property of the spouse who owns it. Part 6 of the ''Family Law Act'' talks about the division of pensions between spouses and says which portion of a pension is supposed to be shared and which parts remain the property of the pension member.  
Part 5 of the ''Family Law Act'' deals with the division of property and debt, and provides the definitions of:
* ''family property'' (s.84) and ''family debt'' (s.86) — presumed to be shared between spouses, and  
* ''excluded property'' (s.85) — presumed to remain the sole property of the spouse who owns it.  
 
Part 6 of the ''Family Law Act'' talks about the division of pensions between spouses and says which portion of a pension is supposed to be shared and which parts remain the property of the pension member.  


This section looks into the nooks and crannies of Part 5 of the act in some detail, but it doesn't say much about pensions because the division of pensions can be extremely complicated. For information about that, you should speak to a family law lawyer. A pension can be a very valuable asset. It is important to include it when dividing property.
This section looks into the nooks and crannies of Part 5 of the act in some detail, but it doesn't say much about pensions because the division of pensions can be extremely complicated. For information about that, you should speak to a family law lawyer. A pension can be a very valuable asset. It is important to include it when dividing property.


===Standing===
===Do you have ''standing'' and the right to make a claim under the ''Family Law Act''?===


''Standing'' is a legal term. If you have standing it means you have the right to make the claim you're making before the judge you're making the claim before. Most spouses under the ''Family Law Act'' have ''standing'' to ask the Supreme Court to divide property and debt when they separate. Spouses who are not married or who have not lived together in a marriage-like relationship of at least two years do not have standing, however. Section 3 says this:
In legal terms, ''standing'' refers to the right to bring a claim before a judge. Under the ''Family Law Act'', spouses can ask the Supreme Court to divide property and debt upon separation.  


Here's the bare essentials for the purposes of the sections of the Act that deal with property division:
* If you are married, then you are a spouse. You have standing.
* If you are unmarried, but have lived together in a marriage-like relationship for at least two years, then you are a spouse. You have standing.
* If you are unmarried, but have ''not'' lived together in a marriage-like relationship for at least two two years, then you are not a spouse. You do not have standing.
Here's the formal language from section 3:
<blockquote><tt>(1) A person is a spouse for the purposes of this Act if the person</tt></blockquote>
<blockquote><tt>(1) A person is a spouse for the purposes of this Act if the person</tt></blockquote>
<blockquote><blockquote><tt>(a) is married to another person, or</tt></blockquote></blockquote>
<blockquote><blockquote><tt>(a) is married to another person, or</tt></blockquote></blockquote>
Line 29: Line 44:
<blockquote><tt>(2) A spouse includes a former spouse.</tt></blockquote>
<blockquote><tt>(2) A spouse includes a former spouse.</tt></blockquote>


Unmarried spouses who have lived together for less than two years are not eligible to ask for orders about the division of property or debt under the ''Family Law Act''. The rules about property that apply unmarried people who have lived together for less than two years spouses are discussed in this chapter under the [[Property and Debt in Family Law Matters]] section, and in the chapter [[Family Relationships]] under the [[Parents]] section.
Note that subsection 3(1)(b)(i) adds a twist. It creates different definitions of ''spouse'' (and therefore different requirements for ''standing'') depending on which part of the ''Family Law Act'' the claim is made under. For other parts of the Act, if you lived in a marriage-like relationship ''and had a child together'', it doesn't matter how long you lived together. For the property and pension division-related sections in Parts 5 and 6 of the Act, you can disregard this subsection. Just having a child together won't give you ''standing''.  


===Period of entitlement===
Again, unless you're married, living together for less than two years means you do not have ''standing'' to make claims for property division under the ''Family Law Act''.
 
====Common law claims for people in shorter relationships====  
If you were in a domestic relationship with someone for less than two years, you ''might'' have potential equitable claims that you can raise. Examples of equitable claims include unjust enrichment and constructive trust claims, and resulting trust claims. Common law couples used to make unjust enrichment and constructive trust claims, and resulting trust claims all the time before the ''Family Law Act'' granted them property division rights. 
 
The challenge is that equitable claims are much more complicated, require a lot of evidence, and are harder to succeed with. This is especially true for short-term relationships, and it must be said that the history of facts required to build a strong case for unjust enrichment in a domestic relationship usually takes time to ripen. Unless a significant event occurred during the brief relationship (like a home was purchased by the couple, but one of them gained much for almost nothing, while the other lost a lot for no good reason), claims to another person's property based on having run some errands, done some chores, or gratuitously performed some favours for 18 months will be hard to substantiate.


Under section 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 section 84(1) as:
Common law claims that apply to unmarried people who have lived together for less than two years spouses are discussed in this chapter under the [[Property and Debt in Family Law Matters]] section.


<blockquote><tt>(a) on the date the spouses separate, property</tt></blockquote>
===Period of entitlement===
<blockquote><blockquote><tt>(i) that is owned by at least one spouse, or</tt></blockquote></blockquote>
<blockquote><blockquote><tt>(ii) in which at least one spouse has a beneficial interest</tt></blockquote></blockquote>


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 section 85:
''Period of entitlement'' refers to the time frame during which spouses have a valid claim to divide up family property or family debts. Sorting out when this period starts, and when it ends, is critical. In simple terms, the entitlement period starts when individuals either get married, or start living together in a marriage-like relationship, whichever is earlier. The period ends when they separate.
====Starting date====
The ''start date'' for the period of entitlement is the date the spouses' relationship begins. This is obviously important because that's when you determine the value of all the assets, and all the debts, that the individuals brought into the relationship. The source for this is found in the definition of ''excluded property'' at section 85:


<blockquote><tt>(1) The following is excluded from family property:</tt></blockquote>
<blockquote><tt>(1) The following is excluded from family property:</tt></blockquote>
<blockquote><blockquote><tt>(a) property acquired by a spouse before the relationship between the spouses began</tt></blockquote></blockquote>
<blockquote><blockquote><tt>(a) property acquired by a spouse before the relationship between the spouses began</tt></blockquote></blockquote>


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


<blockquote><tt>Family debt includes all financial obligations incurred by a spouse</tt></blockquote>
<blockquote><tt>Family debt includes all financial obligations incurred by a spouse</tt></blockquote>
<blockquote><blockquote><tt>(a) during the period beginning when the relationship between the spouses begins and ending when the spouses separate</tt></blockquote></blockquote>
<blockquote><blockquote><tt>(a) during the period beginning when the relationship between the spouses begins and ending when the spouses separate</tt></blockquote></blockquote>
====End date====
The ''end date'' for the entitlement period is found in the definition of ''family property'', and is presumed to be "the date the spouses separate". The source for this is section 84(1):
<blockquote><tt>Subject to section 85 [excluded property], family property is all real property and personal property as follows:</tt></blockquote>
<blockquote><tt><blockquote><tt>(a) on the date the spouses separate, property</tt></blockquote></tt></blockquote>
<blockquote><tt><blockquote><blockquote><tt>(i) that is owned by at least one spouse, or</tt></blockquote></blockquote></tt></blockquote>
<blockquote><tt><blockquote><blockquote><tt>(ii) in which at least one spouse has a beneficial interest</tt></blockquote></blockquote></tt></blockquote>


As you can see, the date when "the relationship between the spouses began" and the date "the spouses separate" are very important. These 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.
As you can see, the date when "the relationship between the spouses began" and the date "the spouses separate" are very important. These 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.
Line 53: Line 81:
====Date of cohabitation and the date of marriage====
====Date of cohabitation and the date of marriage====


Section 3(3) says when a relationship between spouses begins:
Section 3(3) of the ''Family Law Act'' tells us when a relationship between spouses begins:


<blockquote><tt>(3) A relationship between spouses begins on the earlier of the following:</tt></blockquote>
<blockquote><tt>(3) A relationship between spouses begins on the earlier of the following:</tt></blockquote>
Line 61: Line 89:
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.
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.


The date of a couple's marriage is pretty obvious. It isn't always so obvious when a couple "begins" to live together in a marriage-like relationship. The judge in a 2003 case from the Saskatchewan Court of Queen's Bench, ''[http://canlii.ca/t/5bpc Yakiwchuk v. Oaks]'', 2003 SKQB 124, expressed the problem this way:
The date of a couple's marriage is pretty obvious. It isn't always so obvious when a couple "begins" to live together in a marriage-like relationship. The judge in a 2003 case from the Saskatchewan Court of Queen's Bench, ''[https://canlii.ca/t/5bpc Yakiwchuk v. Oaks]'', 2003 SKQB 124, (and a case that has been followed here in BC) expressed the problem this way:


<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>
<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?"
Hands up, anyone who has ever begun to "cohabit with little forethought or planning?"
In this day and age, relationships are no longer defined by financial dependence, sexual relationships, or the mingling of property and finances alone. A judge cannot simply go through a checklist to conclude that a marriage-like relationship exists, and if a judge tries to use a simple checklist (as some have), then their decision is at the risk of an appeal. According to numerous Court of Appeal cases in this province, a judge has to determine when (or if) a marriage-like relationship began by looking holistically at a bunch of contextual factors. A judge must decide whether or not a relationship is marriage-like from an objective perspective.
''[https://canlii.ca/t/jx99d L.T.F. v R.B.F]'', 2023 BCSC 834, is a recent case where the court summarizes leading cases and various factors to bear in mind when trying to determine the starting date of a relationship. Read the section on [[Unmarried Spouses]] in the chapter on [[Family Relationships]], under the heading ''Qualifying as an unmarried spouse'', to learn more about when marriage-like relationships begin.


====The date of separation====
====The date of separation====


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.
Separation usually needs three things:
# ''Intention'': one spouse decides that the relationship cannot continue
# ''Communication'': the spouse says the relationship cannot continue
# ''Action'': the spouse 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.


<blockquote><tt>(4) For the purposes of this Act,</tt></blockquote>
<blockquote><tt>(4) For the purposes of this Act,</tt></blockquote>
Line 77: Line 117:
<blockquote><blockquote><blockquote><tt>(ii) an action, taken by a spouse, that demonstrates the spouse's intention to separate permanently.</tt></blockquote></blockquote></blockquote>
<blockquote><blockquote><blockquote><tt>(ii) an action, taken by a spouse, that demonstrates the spouse's intention to separate permanently.</tt></blockquote></blockquote></blockquote>


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 <span class="noglossary">order</span> 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.
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 marriage-like aspects of a relationship wavered from time to time. See ''[https://canlii.ca/t/hwm44 McDowell v Andrews]'', 2018 BCSC 2216, for an example of a relationship where the beginning and the end were hard to pin down, as was the ''marriage-like'' and ''non-marriage-like'' phases of it.


====Time limits====
In <span class="noglossary">order</span> 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:
===Time limits for making property division claims===


#married spouses must bring their claim within two years of the date of their ''divorce'' or a declaration ''annulling'' their marriage, and
Section 198(2) of the ''Family Law Act'' imposes time limits for bringing claims for the division of property and debt. Understanding these limits is crucial for both married and unmarried spouses:
#unmarried spouses must bring their claim within two years of the date of ''separation''.


Under section 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 section 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."
*Married spouses: Claims must be made within ''two years'' of the date of the ''divorce'' or an ''annulment'' of the marriage.
*Unmarried spouses: Claims must be made within ''two years'' of the date of ''separation''.


===A partnership of acquests===
====Paused time limits====
Under section 198(5) the two year time limit is paused if parties are engaged in ''family dispute resolution'' with a qualified ''family dispute resolution professional'' as defined in section 1 of the Act.


The scheme for the division of property under the ''Family Law Act'' is technically described as 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.
If you are involved in mediation, arbitration, or a collaborative dispute resolution process in an effort to resolve property division issues then the time limits for making a claim are probably on pause.
 
Make sure that if you're using someone to help resolve your issues without going to court, that the person meets the definition of a ''family dispute resolution professional'' under the ''Family Law Act'' and part 3 of the accompanying [https://canlii.ca/t/8rdx#Part_3_Family_Dispute_Resolution_Professionals_14035 Family Law Act Regulation], otherwise time limits will not be paused.
 
Section 198(3) presents another important exception to the standard two-year time limit for property division claims following separation or divorce. This exception applies where a spouse seeks to set aside or replace an existing agreement and they have grounds to do so because a specific wrong was done:
 
* A spouse can apply to set aside or replace an agreement within ''two years'' from the date they first discovered, or reasonably ought to have discovered, grounds for making the application.
* Valid grounds for such an application may include situations like nondisclosure of significant assets, fraud, or undue influence at the time of making the agreement.
 
This exception allows for flexibility in cases where a spouse was coerced or deceived in a way that would have influenced their decision at the time of the agreement.
 
'''Example scenarios where time limits could be paused:'''
* Anju and Kishore, an unmarried couple, separated on January 1, 2022. They started mediation with a certified family dispute resolution professional on December 1, 2023. The two-year time limit for Anju to bring a property division claim pauses on December 1, 2023, extending beyond the original deadline of January 1, 2024.
* Mei and Luis, married, were granted a divorce on June 15, 2021. They began collaborative negotiation on June 1, 2023. Mei's time to file a property division claim, which would have ended on June 15, 2023, is extended due to their participation in the dispute resolution process.
* Fatima and Jamal, who divorced in 2020, had an agreement regarding property division. In 2023, more than two years after the divorce, Fatima discovered that Jamal had failed to disclose significant assets during their negotiations. She applies to set aside the agreement under section 198(3) of the Act within two years of discovering this non-disclosure. This application is valid as it is based on grounds of nondisclosure of significant property, which is a recognized reason for setting aside an agreement under the Act. This exception recognizes the importance of fair and informed consent in family law agreements and provides a remedy for situations where this standard may have been compromised.
 
For more detailed information, consider seeking legal advice or consulting the full text of the ''Family Law Act''.
 
===The philosophy behind the ''Family Law Act'' and its scheme for dividing property===
 
The scheme for dividing property under the ''Family Law Act'' is technically described as a ''deferred partnership of acquests'' regime. The ''deferred partnership of acquests'' regime focuses on property accumulated during the relationship, with both spouses having a presumed equal interest in such property that's only realized upon (and is therefore "deferred" until) separation. It emphasizes the timing and manner of acquisition of family property rather than how the property was used. Property acquired before the relationship or through certain means (like inheritance) is typically excluded, and known as "excluded property."
 
BC's old ''Family Relations Act'', which was retired in 2013, used a ''deferred community of property'' regime. The ''deferred community of property'' differs from the ''deferred partnership of acquests'' regime by focusing on how property was used. If property was "ordinarily used for a family purpose" it was considered for division, regardless of when or how it was acquired. This meant that the ownership of property was less significant than how it was utilized within the family context. Consequently, most assets owned by the spouses, irrespective of their individual contributions or the name on the title, were often subject to equal division upon separation.


====The ''Family Relations Act'' and the ''Family Law Act''====
====The ''Family Relations Act'' and the ''Family Law Act''====


Under the ''Family Relations Act'', married spouses shared in all property that was "ordinarily used for a family purpose." This meant that you didn't need to look at who owned something on paper, how something was acquired, or whether property was acquired before or during the relationship; what mattered was how the property was ''used''. For most couples, ''everything'' they had wound up being ordinarily used for a family purpose in one way or another.
Under the ''Family Relations Act'', married spouses shared in all property that was "ordinarily used for a family purpose." This meant that you didn't need to look at who owned something on paper, how something was acquired, or whether property was acquired before or during the relationship. What mattered was how the property was ''used''. For most couples, ''everything'' they had wound up being ordinarily used for a family purpose in one way or another.


Under the ''Family Law Act'', use is irrelevant. In fact that's exactly what section 81(a) says:
Under the ''Family Law Act'', use is irrelevant. In fact that's exactly what section 81(a) says:
Line 100: Line 163:
<blockquote><tt>spouses are both entitled to family property and responsible for family debt, regardless of their respective use or contribution</tt></blockquote>
<blockquote><tt>spouses are both entitled to family property and responsible for family debt, regardless of their respective use or contribution</tt></blockquote>


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 bought with excluded property.
What matters now, under the ''deferred partnership of acquests'' regime, is ''when'' property was acquired and ''how'' property was acquired:
* On the date of separation, each spouse is only presumed to have an interest in the assets that accumulated during their relationship (but not assets that can be traced to the other spouse's excluded property).
* Property bought before the spouses' relationship began is presumed to be excluded property.
* Property acquired during the relationship, but which was bought using money that can be traced to excluded property, is also presumed to be excluded property.  
 
Under the old ''deferred community of property'' regime of the ''Family Relations Act'':
* Both spouses were presumed to have an interest in all property on the date of separation.


====Transition provisions====
====Transition provisions====
Line 117: Line 186:
==Who gets what under the ''Family Law Act''==
==Who gets what under the ''Family Law Act''==


Property division is covered under Part 5 of the ''Family Law Act''. The general rule for how property and debt get divided up is found under section 81:
Property division is covered under Part 5 of the ''Family Law Act''. This chapter has already introduced the general rules around property and debt division:
* family property and family debt are shared, while
* excluded property is not.


<blockquote><tt>Subject to an agreement or order that provides otherwise and except as set out in this Part and Part 6 [Pension Division],</tt></blockquote>
A convenient way to think about the presumptions on what you keep versus what you share based on sections 84, 85, and 86 are:
<blockquote><blockquote><tt>(a) spouses are both entitled to family property and responsible for family debt, regardless of their respective use or contribution, and</tt></blockquote></blockquote>
<blockquote><blockquote><tt>(b) on separation, each spouse has a right to an undivided half interest in all family property as a tenant in common, and is equally responsible for family debt.</tt></blockquote></blockquote>


The rest of Part 5 concerns:
{| class="wikitable"
|-
! What you keep
! What you share
|-
| '''Excluded property you brought into the relationship'''
* What you brought into the relationship, but the increased value since then is shared.
| '''Real and personal property owned at separation'''
* All real and personal property owned by either spouse (including a beneficial interest) as of the separation date, unless it's excluded property.
|-
| '''Specific excluded property received during the relationship'''
* Inheritances
* Gifts from a third party (if solely to you and not the other spouse)
* Settlements, awards, or non-property insurance payouts not for lost income.
| '''Specific types of family property (unless excluded)'''
* Shares or interests in corporations
* Interests in partnerships, businesses, or ventures
* Refunds, including tax refunds, owed to either spouse
* Money in accounts at financial institutions in either spouse's name
* Entitlements under pensions, retirement savings, or income plans
* Property disposed of after the relationship began but still under control or authority
|-
| '''Beneficial interest in a discretionary trust established by someone else'''
* Your beneficial interest in a discretionary trust established by someone else, without your contribution.
| '''Assets derived from the sale or conversion of family property after separation'''
* Any assets derived from the sale or conversion of family property done after separation.
|-
| '''Assets derived from the sale or conversion of excluded property'''
* Any assets derived from the sale or conversion of any of the other kinds of excluded property.
| '''Increase in value of excluded property'''
* The increase in value of any excluded property since it was brought into the relationship or since it was acquired, whichever is later.
|-
| '''Debt brought into the relationship'''
* Any debt that you brought into the relationship, but the increase in debt since then is shared.
| '''Certain cases of trust property contributions'''
* In cases where either spouse contributed to a trust, particularly if:
** The contributing spouse is a beneficiary with a vested interest in the trust
** The contributing spouse has the power to transfer trust property to themselves or terminate the trust, resulting in the property reverting to them.
|-
|
| '''Increases in debt brought into the relationship'''
* The interest that accrues on any debts either spouse brought into the relationship, calculated from the beginning of the relationship until separation.
|}


*the definitions of "family property" and "family debt," and what is excluded from family property,
===General outline for Part 5 of the Act===
Part 5 deals with:
*the definitions of ''family property'', ''excluded property'', and ''family debt,''
*the rules for how the division of property and debt are to be accomplished, and the exceptions to those rules,  
*the rules for how the division of property and debt are to be accomplished, and the exceptions to those rules,  
*orders for the division of property and debt, and the circumstances when the court can divide family property unequally or divide excluded property, and
*orders for the division of property and debt, including when the court can divide family property unequally or divide excluded property, and
*agreements for the division of property when the court may set those agreements aside.
*agreements for the division of property and when the court may set those agreements aside.
 
For a discussion about pets (specifically ''companion animals''), and how these animals are now treated as a special kind of property in Part 5 of the Act since amendments took effect on January 14, 2024, see the [[Dividing Property and Debt in Family Law Matters]] section of this chapter.


===Family property and family debt===
===Family property and family debt===


Family property is defined at section 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.
Family property is defined at section 84(1) of the ''Family Law Act''. It basically says that family property is:
* all the property owned by either or both spouses ''on the date of their separation'',
* minus ''excluded property''.  
 
Family property also includes property that is bought ''after separation'', but using money that was derived from and can be traced back to 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 still be family property.  


Section 84(2) gets into the specifics of the sorts of things that might be family property:
Section 84(2) gets into the specifics of the sorts of things that might be family property:
Line 150: Line 270:
<blockquote><tt>(3) Despite subsection (1) of this section and subject to section 85 (1) (e), family property includes that part of trust property contributed by a spouse to a trust in which</tt></blockquote>
<blockquote><tt>(3) Despite subsection (1) of this section and subject to section 85 (1) (e), family property includes that part of trust property contributed by a spouse to a trust in which</tt></blockquote>
<blockquote><blockquote><tt>(a) the spouse is a beneficiary, and has a vested interest in that part of the trust property that is not subject to divestment, </tt></blockquote></blockquote>
<blockquote><blockquote><tt>(a) the spouse is a beneficiary, and has a vested interest in that part of the trust property that is not subject to divestment, </tt></blockquote></blockquote>
<blockquote><blockquote><tt>(b) the spouse has a power to transfer to himself or herself that part of the trust property, or</tt></blockquote></blockquote>
<blockquote><blockquote><tt>(b) the spouse has a power to transfer to themselves that part of the trust property, or</tt></blockquote></blockquote>
<blockquote><blockquote><tt>(c) the spouse has a power to terminate the trust and, on termination, that part of the trust property reverts to the spouse. </tt></blockquote></blockquote>
<blockquote><blockquote><tt>(c) the spouse has a power to terminate the trust and, on termination, that part of the trust property reverts to the spouse. </tt></blockquote></blockquote>


Line 177: Line 297:
=====How property is owned=====
=====How property is owned=====


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."
Two or more people can own the same property in one of two ways:  
# they can own the property as "joint tenants", or  
# they can own it as "tenants in common."


When two or more people own a thing as ''joint tenants'', they are each owners of the whole thing. This is a fuzzy kind of shared ownership because the interests of one owner can't be separated out from the interests of the other because they each own the whole thing. To put it another way, a joint tenant doesn't own a particular slice of the pie, a joint tenant owns the whole pie.
=====Joint tenants=====
When two or more people own a thing as ''joint tenants'', they are each owners of the whole thing. This is a fuzzy kind of shared ownership because the interests of one owner can't be separated out from the interests of the other owner(s) because they each own the whole thing. To put it another way, a joint tenant doesn't own a particular slice of the pie, a joint tenant owns the whole pie.


When a joint tenant dies, their interest in the asset disappears, and the surviving joint tenants continue to own the whole asset as they always had. As a result, joint tenancies are extremely handy estate planning tools.
When a joint tenant dies, their interest in the asset disappears, and the surviving joint tenants continue to own the whole asset as they always had. As a result, joint tenancies are extremely handy estate planning tools: the ''right of survivorship'' means that the legal interests of a joint tenant in a house does not pass through probate when the joint tenant dies; the surviving joint tenants simply and automatically continue forward as owners of the whole interest in the property.


When people own a thing as ''tenants in common'', each owner's interest in a property is separate and distinct. The tenants in common of a property each own their particular slice of the pie; collectively, they all own the whole pie, but individually they just own their personal share.
=====Tenants in common=====
When people own a thing as ''tenants in common'', each owner's interest in a property is separate and distinct. The tenants in common of a property each own their particular slice of the pie; collectively, they all own the whole pie, but individually they just own their personal share. If you had two joint tenants of a house, each would have a ''divided one-half interest''.


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


=====The effect of the Separation=====
=====The effect of separation=====


Section 81(b) of the ''Family Law Act'' states:
Section 81(b) of the ''Family Law Act'' states:
Line 207: Line 331:
===Excluded property===
===Excluded property===


The definition of ''family property'' at section 84 starts from the assumption that ''all property'' either or both spouses own on the date of separation is shareable family property. Under section 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''.  
The definition of ''family property'' at section 84 starts from the assumption that ''all property'' either or both spouses own on the date of separation is shareable family property, with the exception of ''excluded property''.


Excluded property is defined at section 85(1):
Excluded property is defined at section 85(1):
Line 213: Line 337:
<blockquote><tt>(1) The following is excluded from family property: </tt></blockquote>
<blockquote><tt>(1) The following is excluded from family property: </tt></blockquote>
<blockquote><blockquote><tt>(a) property acquired by a spouse before the relationship between the spouses began; </tt></blockquote></blockquote>
<blockquote><blockquote><tt>(a) property acquired by a spouse before the relationship between the spouses began; </tt></blockquote></blockquote>
<blockquote><blockquote><tt>(b) gifts or inheritances to a spouse; </tt></blockquote></blockquote>
<blockquote><blockquote><tt>(b) inheritances to a spouse; </tt></blockquote></blockquote>
<blockquote><blockquote><tt>(b.1) gifts to a spouse from a third party;</blockquote></blockquote></tt>
<blockquote><blockquote><tt>(c) a settlement or an award of damages to a spouse as compensation for injury or loss, unless the settlement or award represents compensation for</tt></blockquote></blockquote>
<blockquote><blockquote><tt>(c) a settlement or an award of damages to a spouse as compensation for injury or loss, unless the settlement or award represents compensation for</tt></blockquote></blockquote>
<blockquote><blockquote><blockquote><tt>(i) loss to both spouses, or</tt></blockquote></blockquote></blockquote>
<blockquote><blockquote><blockquote><tt>(i) loss to both spouses, or</tt></blockquote></blockquote></blockquote>
Line 235: Line 360:
*property held in a trust that was contributed by someone else.
*property held in a trust that was contributed by someone else.


Perhaps most importantly, under section 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''.
Perhaps most importantly, under section 85(1)(g), excluded property includes property bought during the relationship with excluded property. This is another kind of ''tracing'' provision, because you trace the money (or other value) used to pay for a recently acquired piece of property to prove that it came from, or was ''derived'' from, property that was excluded.
 
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''.
 
====Burden of proof is on the spouse claiming exclusion====
Under section 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''.
 
For some property this is easy to do, for example when someone owns their own home before the relationship even started. But for more ambiguous scenarios, like when one spouse says that the large amount of money they received from their parent is a gift to them personally, and was not intended for the couple, evidence of everything that happened around a transaction can be critical. Consider the case of ''[https://canlii.ca/t/jq0tt Zhao v. Fang]'', 2022 BCCA 227, which involved a gift that the husband claimed to be excluded under section 85(1)(b.1), but which the wife disagreed was a gift. The Court of Appeal talked about the role that evidence plays in proving property deserves to be excluded:
<blockquote>
"[25]      Excluded property, defined in s. 85(1), includes “gifts to a spouse from a third party”. Under s. 85(2) the spouse making this claim has the burden of demonstrating that property is excluded property. The standard of proof is on a balance of probabilities (as in any civil case), but the evidence must be clear and cogent. If documentary evidence is not available, a party's testimony on this issue is to be scrutinized for credibility. However, the judge is permitted to draw reasonable inferences from evidence that is less certain or precise in order to do justice between the parties [...]"
</blockquote>
 
====Amendments to the ''Family Law Act'' that reinforce excluded property====
 
Where a married person transfers their excluded property into the name of the other spouse, there used to be a risk that this excluded property would become family property. This risk came from a contentious old legal doctrine called the ''presumption of advancement''. The presumption applied when gratuitous transfers were traditionally made by a husband to his wife. Before May 2023, the ''Family Law Act'' did not explicitly address this old doctrine. It did not say if it applied or not, and a rift emerged between one line of court judgments that imposed the doctrine, and another line of court judgments that rejected it. In May 2023, the Act was amended to try and resolve this inconsistency. Subsection 85(3) was added to the Act, which says:
 
<blockquote><tt>If property is excluded from family property under subsection (1), the exclusion applies despite any transfer of legal or beneficial ownership of the property from a spouse to the other spouse.</tt></blockquote>


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 one spouse's parent gives money or property during the relationship, the other spouse might 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. If you are intent on reading the cases, a reasonably recent Supreme Court decision, ''[http://canlii.ca/t/hxbcm McManus v McManus]'', 2019 BCSC 123, cites and discusses several of the leading cases (see paragraph 27 of the decision).
This amendment also added a number of sections to the Act, including section 81.1(1), which does away with the ''presumption of advancement'', and section 81.1(2) which does away with the ''presumption of resulting trusts'':
<blockquote><tt>Certain presumptions not be applied</tt></blockquote>
<blockquote><blockquote><tt>81.1 (1) The rule of law applying a presumption of advancement must not be applied in question respecting the ownership of property as between spouses.</tt></blockquote></blockquote> 
<blockquote><blockquote><blockquote><tt>(2) The rule of law applying a presumption of resulting trust must not be applied in question respecting the ownership of property as between spouses.</tt></blockquote></blockquote></blockquote> 
 
Let's consider an example that illustrates the impact of this amendment dealing with the presumption of advancement. Here is a fictional scenario:
* Jacob owned his own house prior to marrying Carmen.
* The house is excluded property.  
* Once married, he adds Carmen on title to the house as a joint tenant.
* He does this because it is a common estate planning strategy to avoid unnecessary probate fees, but he doesn't keep evidence to show this intention.
 
Prior to the May 2023 ''Family Law Act'' amendments, unless Jacob somehow had the foresight to get Carmen's explicit acknowledgement that adding her to title was not intended to be a gift, Jacob risked losing his excluded property under the presumption of advancement. The court might have felt bound to presume that a gift was intended. Because the presumption of advancement is now abolished by section 81.1(1), and because section 85(3) now makes it clear that the exclusion of excluded property applies despite any transfer of legal or beneficial ownership to the other spouse, Jacob will not lose the value of his excluded property if Carmen and he separate.
 
Section 81.1(2) does away with the ''presumption of resulting trust'' which is also an equitable law doctrine (more or less the opposite of the presumption of advancement), which states that the gratuitous transfer of property from a parent to an adult child, is ''not'' presumed to be a gift. The presumption is that an obligation is imposed on the adult child to hold that property in trust, meaning the parent would maintain beneficial ownership even if the legal ownership was in the adult child's name.
 
Both forms of common law presumptions were intended to provide a convenient default presumption in cases where the evidence didn't lean either way. Whether the transfer of property was intended as a gift or not could be presumed just based on the specific relationship of the people involved. With the amendments, the ''Family Law Act'' now does not presume anything about the intention of a transfer. That's what sections 81.1(1) and (2) now say. And section 85(3) reinforces that excluded property keeps its excluded nature, even when legal or beneficial ownership is transferred to the other spouse.
 
'''Note for family law proceedings started before May 11, 2023''': If you are involved in a family law proceeding that was commenced before May 11, 2023, the amendments do not apply, and you may still argue about the presumptions of advancement and resulting trust in your case.


====Taking stock at the beginning of a relationship====
====Taking stock at the beginning of a relationship====
Line 278: Line 436:
*a spouse wants to start a court proceeding to enforce or set aside an agreement about property that was signed before 18 March 2013.
*a spouse wants to start a court proceeding to enforce or set aside an agreement about property that was signed before 18 March 2013.


As a resut, it's going to be important to know how family property is divided under the ''Family Relations Act'' for a while longer.
As a result, for some cases it's still important 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.
The division and distribution of property between married spouses was governed by Parts 5 (''matrimonial property''} and 6 (''division of pension entitlement'') 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.


===The presumption of equal sharing===
===The presumption of equal sharing===
Line 364: Line 522:
==Cohabitation agreements and marriage agreements==
==Cohabitation agreements and marriage agreements==


[[Cohabitation and Living Together Agreements|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.  
You can read more about ''[[Cohabitation and Living Together Agreements|cohabitation agreements]]'' under the chapter on [[Family Law Agreements]]. In short, they are agreements between people who will be or are living together, and who may or may not wind up getting married later on down the road.  
 
That chapter also talks about ''[[Marriage Agreements|marriage agreements]]'', which are between people who will be getting, or are, married. (Although there's no reason why these agreements can't be entered into well after a relationship begins, they're usually signed on or shortly after the date the parties begin to live together or marry.)


[[Marriage Agreements|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 on or shortly after the date the parties begin to live together or marry.
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.  


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 section 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.
The ''Family Law Act'' specifically addresses agreements respecting property division at section 92:
<blockquote><tt>92 Despite any provision of this Part but subject to section 93 [setting aside agreements respecting property division], spouses may make agreements respecting the division of property and debt, including agreements to do one or more of the following:</tt></blockquote>
<blockquote><blockquote><tt>(a) divide family property or family debt, or both, and do so equally or unequally;</tt></blockquote></blockquote>
<blockquote><blockquote><tt>(b) include as family property or family debt items of property or debt that would not otherwise be included;</tt></blockquote></blockquote>
<blockquote><blockquote><tt>(c) exclude as family property or family debt items of property or debt that would otherwise be included;</tt></blockquote></blockquote>
<blockquote><blockquote><tt>(d) value family property or family debt differently than it would be valued under section 87 [valuing family property and family debt].</tt></blockquote></blockquote>


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 default plan that the act expects. Here are some ideas. An agreement could:
Many people are content with the basic plan for the division of property set out in the ''Family Law Act'', so the question is often about what a cohabitation agreement or a marriage agreement can do that would be better than the default plan that the Act expects. Here are some things that an agreement could do, that alter the default property division rules under the Act:


*clarify which property is excluded property and what its value was when the relationship began,
*clarify which property is excluded property and what its value was when the relationship began,
Line 380: Line 545:
*say what will happen if a spouse's excluded property decreases in value during the relationship.
*say what will happen if a spouse's excluded property decreases in value during the relationship.


I'm sure there are other options as well.
===Do you have ''standing'' to enter agreements under the ''Family Law Act''?===
If you are over the age of majority, the answer is yes.
 
Because many agreements look ahead in time to what could happen in a relationship, you don't need existing rights claim property division under the ''Family Law Act'' before making an agreement that deals with what would happen once you and another person become married or unmarried spouses. Section 6 of the Act says:
<blockquote><tt>(1) Subject to this Act, 2 or more persons may make an agreement</tt></blockquote>
<blockquote><blockquote><tt>[...]</tt></blockquote></blockquote>
<blockquote><blockquote><tt>(b) respecting</tt></blockquote></blockquote>
<blockquote><blockquote><blockquote><tt>(i) a matter that may be the subject of a family law dispute in the future,</tt></blockquote></blockquote></blockquote>
<blockquote><blockquote><blockquote><tt>(ii) the means of resolving a family law dispute or a matter that may be the subject of a family law dispute in the future, including the type of family dispute resolution to be used, or</tt></blockquote></blockquote></blockquote>
<blockquote><blockquote><blockquote><tt>(iii) the implementation of an agreement or order.</tt></blockquote></blockquote></blockquote>
 
Agreements between any two people, even those who are not married and are not living together, can be used to change how property and debt will be divided later on when they are spouses under the Part 5 property division sections of the Act.


==Resources and links==
==Resources and links==
Line 392: Line 568:


*[https://www.clicklaw.bc.ca/resource/1240 Dial-A-Law Script "Dividing Property and Debts"]
*[https://www.clicklaw.bc.ca/resource/1240 Dial-A-Law Script "Dividing Property and Debts"]
*[http://www.clicklaw.bc.ca/resource/1529 Justice Education Society's handbook ''Parenting After Separation: Finances'']
*[https://www.clicklaw.bc.ca/resource/1529 Justice Education Society's handbook ''Parenting After Separation: Finances'']
*[http://www.clicklaw.bc.ca/resource/4656 Legal Aid BC’s Family Law website's information page "Property & debt"]
*[https://www.clicklaw.bc.ca/resource/4656 Legal Aid BC’s Family Law website's information page "Property & debt"]
** See "Dividing property and debts"
** See "Dividing property and debts"




{{REVIEWED | reviewer = [[JP Boyd]], April 22, 2022}}
{{REVIEWED | reviewer = [[Trudy Hopman]] and [[Kenneth Craig]], October 19, 2023}}


{{JP Boyd on Family Law Navbox|type=chapters}}
{{JP Boyd on Family Law Navbox|type=chapters}}
Retrieved from "https://stagewiki.clicklaw.bc.ca/index.php?title=Special:MobileDiff/57444"

Navigation menu