If you and your spouse have joint assets such as a family home, bank accounts or investments, a separation can create chaos with your finances during an already overwhelming time.
This blog is for owners of joint property in British Columbia and seeks to answer the big questions of “who gets what?”, and more importantly, “can this be taken away from me?”
What is Family Property?
The Family Law Act (“FLA”) regulates the division of property in British Columbia. The FLA applies to spouses who are:
- Married; and
- Common Law – i.e. couples who are not married but live together (or have lived together for a period of at least two years) and who share a relationship similar to that of married spouses.
There are two types of property outlined in the FLA, namely “Family Property” and “Excluded Property”.
Section 84 of the FLA defines “Family Property” as: The real and personal property that you and your spouse individually or jointly own, or property acquired in the course of the relationship and before separation.
“Family Property” can be owned in the name of either spouse. It does not need to have both spouses jointly named.
Examples of “Family Property” are:
- The shared house
- Insurance policies
- Bank accounts
- Shares in a company
- Registered Retirement Savings Plans (RRSPs)
In most cases, “Family Property” is subject to an equal 50/50 division on separation.
Section 85 of the FLA defines “Excluded Property” as: Property that is kept separate and generally obtained prior to the beginning of the relationship.
Examples of “Excluded Property” are:
- If one spouse receives an award of damages as a result of court proceedings
The rules with respect to the division and value of excluded property are the subject of a separate blog post: Click here.
What Is Family Debt?
Family Property” also includes “Family Debt”.
“Family Debts” are those debts which have been acquired throughout the duration of the marriage or marriage-like relationship, by one or both spouses.
Examples of “Family Debt” are:
- Credit cards
- Income tax
- Bank overdrafts
- Loans from family members
In some cases, where a spouse has incurred debt to pay for or take care of the Family Property after the separation, this may also be included in the “Family Debt” calculation.
How Are Family Assets and Family Debt Divided?
For most situations in British Columbia, a Marriage or Common-Law Relationship is regarded as an equal partnership.
It makes no difference whether one spouse is solely responsible for earning the family income whilst the other is solely responsible for running the household, or if it is a combination of both. Put another way, the contributions and losses of each spouse are considered equal to the relationship.
Accordingly, if you and your spouse choose to separate, the law states that all “Family Property” and “Family Debt” must be divided equally between the two spouses, unless it can be proven by one spouse that equal division is unfair, or if an Agreement to the contrary otherwise exists.
Unequal Division– Exceptions to a 50/50 split
If it would be unfair to divide the “Family Property” and/or “Family Debt” equally (50/50), the Court may order that it be divided unequally (something other than 50/50).
The following are examples of what the Court may take into consideration when deciding whether an equal division of property would amount to significant inequality or unfairness:
- The duration of the relationship (i.e. How long the couple has been together in either a marriage or common-law relationship)
- Whether the debt incurred by one spouse was reckless
- If the Family Debts outweigh the value of the Family Property
- Each spouse’s ability to pay off a share of the Family Debt
- If, prior to separation, one spouse acted in a manner that significantly increased or decreased the value of the Property or Debt
- If the Property was transferred to one spouse, and he/she is thus responsible for the corresponding taxes
As an alternative to having the Court decide the division – Spouses may enter into an Agreement on how to divide the Family Property and/or Debt unequally.
This may be done by way of the following kinds of agreements:
- Marriage Agreement, which is made before or during the marriage;
- Cohabitation Agreement
- Separation Agreement
- By Consent Order
The Court is required to respect any agreements with respect to division of property if they are reached by consent of the spouses. The rules with respect to unequal division and fairness is the subject of a separate blog post: Click here.
How is the Value of Family Property and Debt Determined?
Section 87 of the Family Law Act provides the legal basis for valuation of Family Property. Family Property and Family Debt are determined at either of the following:
- On the date the spouses enter into an Agreement whereby they mutually agree how to divide the Property and Debt; or
- Upon a hearing before the Court.
In other words – Until an Agreement is crystalized, or a trial begins, property values may fluctuate, or experience fair market increases or decreases.
What Time Limitations Exist?
If you and/or your spouse wish to commence a claim to divide Family Property and Family Debt, there are strict time limitations to be mindful of:
- Married spouses are required to submit their claim no later than two years after the date of the divorce or date on which the marriage was annulled.
- Common-Law spouses must apply for division within two years of the date they separated.
This blog post provides general information with respect to division of Family Property and Family Debt in British Columbia following your separation.
It is strongly encouraged that you consult with a Family Law lawyer to discuss your rights and obligations with respect to how they apply to your specific situation.