Family Property
SOLUTIONS

How do I divide property at the end of my relationship?

The division of property on the breakdown of a marriage and/or an adult interdependent relationship is different in each province.  In Alberta we look to the Family Property Act.  

Before January 1, 2020 the legislation was called the Matrimonial Property Act and specifically excluded unmarried people.  In other words, before January 1, 2020 there was no legislation in Alberta that directed how to distribute property for unmarried couples on separation.  As a result, courts developed their own rules.  These court developed rules directed an examination of the extent of each party’s contribution (direct or indirect) to the acquisition, preservation, maintenance or improvement of each asset.  The property was then distributed in what the court determined to be a just and equitable manner based on the level of each party’s contribution.  

While the Family Property Act now includes unmarried couples who meet the description of adult interdependent partners, it only applies if you were not married and separated after January 1, 2020.  In other words, if you separated from your partner after January 1, 2020 then the new legislation will apply to you.  If you are adult interdependent partners and separated prior to January 1, 2020 the common law rules developed by the court relating to level of contributions will still apply.

How do I tell if I am living separate and apart?

Physically living separate and apart is not the sole determinant of whether or not you are separated from your spouse or partner.  There are many factors a court will consider, including:

1. Whether you continue to reside in the same residence;
2. Whether you still share finances or have bank accounts together;
3. Whether you have told friends and family that you have separated;
4. Whether you cook, clean, do laundry or other domestic services for your spouse; and
5. Whether you have sexual relations and/or sleep together in the same bedroom.

No one factor is more important than the other.

The Family Property Act describes how the court will distribute property on the breakdown of a marriage or of an adult interdependent partner relationship if you separated after January 1, 2020.

How is family property classified?

The Family Property Act characterizes property in three ways:

1. Property accumulated during the marriage.  This type of property is most often distributed equally.  It is only in unique circumstances that property will be distributed in a proportion other than equal

2. Property that is exempt from distribution.  This property includes:

• Property acquired by a spouse or partner by gift from a third party;
• Property acquired by a spouse or partner by inheritance;
• Property acquired by a spouse or partner prior to the marriage;
• A settlement or court award for damages in tort; or
• The proceeds of an insurance policy that is not insurance relating to the replacement of property (for example, a life insurance death benefit).

The value of this property at the time of the marriage or at the time of receipt, whichever occurred later, is the value that will be exempt from distribution, subject to rules relating to tracing and the placing of such an asset into joint names. This increase is subject to distribution between spouses/partners but not necessarily equally.  Rather, the court will distribute the increase in an amount the court determines to be just and equitable.

3. The increase in value of exempt property.  There is no presumption that this increase will be divided equally.  Rather, the court will divide this property in a “just and equitable” manner.

The onus to prove an exemption falls to the party asserting it.  In other words, if you have property that can be classified as exempt, you must provide evidence to prove the asset falls into an exempt category.

How is family property divided?

The ultimate calculation of property distribution involves the following steps:

• Identifying all of the assets and liabilities;
• Attaching a value to each asset and a balance to each liability;
• Determining who is going to keep each asset and be responsible for each debt.  Generally, if there is a debt attached to an asset the individual keeping the asset is responsible for the debt;
• Determining the extent of any exempt assets;
• Dividing up the non-exempt assets, including the increase in value of exempt assets in a fair and equitable manner, and then calculating each party’s net position;
• Calculating an “equalization payment”.  The equalization payment is an amount equivalent to one-half of the difference in each party's net position, paid by the individual that has the higher net position.

An asset cannot be foisted by one party onto another.  If neither of you want an asset then it will need to be sold and the net sale proceeds shared.

In terms of determining the value of each asset, parties are able to choose their own effective date of valuation.  If you cannot agree on a date, the court will use the most current value available, subject to a variety of different considerations that need to be advanced by the party who does not believe it fair to use the most current date.

Can I have my spouse removed from our home?

If residing with your spouse in the same residence becomes unmanageable you can ask the court for an “exclusive possession” order.  If successful, this will allow you to have temporary possession of the house and contents to the exclusion of your spouse/partner.  It does not determine who will ultimately get to keep the house nor does it affect either of your rights to eventually get your share of the value of the house.  In asking the court for an exclusive possession order the court will primarily consider the following three things:

1. Alternative accommodations available to each of you;
2. Which of you has the greater economic resources necessary in order to secure an alternative residence; and
3. The needs of any children residing in the home.

If violence is an issue or if you feel scared or unsafe in any way you should leave the house immediately.  This will not prejudice your ability to obtain your share of the value of the house later on nor will it necessarily mean that you cannot ask the court for exclusive possession later.  Your safety, and the safety of your children is paramount and should not be ignored.

If I leave the house, does it impact my rights?

If you leave the house or are kicked out, this does not affect your right to still receive the share of the value from the house that you would otherwise be entitled to receive.

If violence is an issue or if you feel scared or unsafe in any way you should leave the house immediately.  This will not prejudice your ability to obtain your share of the value of the house later on nor will it necessarily mean that you cannot ask the court for exclusive possession later.  Your safety, and the safety of your children is paramount and should not be ignored.

Am I going to lose half of everything?

If you are married, or if you are unmarried but did not separate until after January 1, 2020 then the rules set out in the Family Property Act relating to the division of property will apply.  Generally speaking, under these circumstances it is only in unique circumstances that you will receive more or less than half of the value of the property accumulated while you cohabited together subject to the rules on exempt property. 

If you are unmarried and separated before January 1, 2020 the division of your property will be based on the level of each party’s contribution to the acquisition, preservation, maintenance and improvement of each asset, both direct and indirect.  Indirect contributions can include one partner staying home to care for children leaving the other with the ability to earn income to use in building up an asset base.

What is an exemption?

Exempt assets include:

• Property acquired by a spouse or partner by gift from a third party;
• Property acquired by a spouse or partner by inheritance;
• Property acquired by a spouse or partner prior to the marriage;
• A settlement or court award for damages in tort; or
• The proceeds of an insurance policy that is not insurance relating to the replacement of property (for example, a life insurance death benefit).

The value of exempt assets at the later of the time of receipt or the cohabitation are not shareable at all provided you:

• still own the asset or can trace it into a later acquired asset obtained using proceeds from the sale of the exempt asset; or
• have not put legal ownership of that asset into both your name and the name of your spouse/partner.  

The increase in value of exempt assets are subject to division, but not necessarily equally.

When is an inheritance exempt?

If you receive an inheritance either before or after starting to live together with your spouse/partner you do not need to share it if your separate thereafter.  Inheritances are considered an exempt asset.  However, you must be able to trace the asset into an asset that current exists in order to maintain your exemption.  Further, if you put any portion of the inheritance into a jointly held asset you lose half of your otherwise exempt amount of that portion.  The onus is on you to prove that you received the inheritance and to show that it still exists in some tangible form.

As an example, if you receive a $100,000 inheritance during the cohabitation and then separate later, if you took that $100,000 and put it into an investment that still exists, on separation you will be entitled to receive the first $100,000 from that investment without having to share it with your spouse or partner.  Any increase in value will be subject to distribution in a “fair and equitable” manner.

If you received $100,000 as an inheritance, but only invested $80,000, with the other $20,000 being spent on non-tangible assets, this $20,000 will be considered “spent funds” and no exemption will apply.  You would still receive the first $80,000 from that inheritance as an exemption.

If you received $100,000 as an inheritance, invested $80,000, and put the other $20,000 into the jointly owned home, your exemption would be the $80,000 put into the investment.   So long as you can show that the other $20,000 went into the jointly owned home you would receive an additional $10,000 exemption (you lose half the value of exempt funds put into joint assets).  The remaining $10,000 would be split in a fair and equitable manner.

When is a gift exempt?

A gift from a 3rd party to one party alone is not shareable with your spouse/partner on the breakdown of your relationship as these are considered exempt assets.  Gifts between spouses/partners are not usually exempt and are shareable.

You must be able to trace the gift into an asset that current exists in order to maintain your exemption.  The onus is on you to prove that the gift you received was from a 3rd party to you and you alone.  If the gift was to both of you there is no exemption.

When is a personal injury award or tort settlement claim exempt?

If you receive a settlement award or settlement proceeds related to a tort claim (like a personal injury) you do not need to share it if your separate thereafter.  For clarity, any portion of the award or settlement proceeds relating to the replacement of lost wages may be shareable, however, the portion related to pain and suffering is not.

You must be able to trace the award or settlement proceeds into an asset that current exists in order to maintain your exemption.  If you put any portion of the award or settlement proceeds into a jointly held asset you lose half of your otherwise exempt amount.  The onus is on you to prove that you received the award or settlement proceeds and to show that it still exists in some tangible form.

As an example, if you receive a $100,000 settlement for pain and suffering arising from a car accident and then put those funds into an investment that still exists, you will be entitled to receive the first $100,000 from that investment.  Any increase in value will be subject to distribution in a “fair and equitable” manner.

If you received a $100,000 settlement but only invested $80,000, with the other $20,000 being spent on non-tangible assets, this $20,000 will be considered “spent funds” and no exemption will apply.  You would still receive the first $80,000 from that settlement as an exemption.

If you received a $100,000 settlement, invested $80,000, and put the other $20,000 into a jointly owned home, your exemption would be the $80,000 put into the investment.   So long as you can show that the other $20,000 went into the jointly owned home you would receive an additional $10,000 exemption (you lose half the value of exempt funds put into joint assets).  The remaining $10,000 would be split in a fair and equitable manner.

How do you trace an exemption?

The individual asserting that an asset is exempt bears the onus of proving the exemption.  In short, an exempt asset need not remain in its original form in order to be entitled to claim the exemption.  So long as you can show that you still have a tangible asset that originated from the exempt assets you will be entitled to claim the exemption.

Conversely, if you have disposed of an exempt asset or spent the funds received from the disposal of an exempt asset you will not be entitled to claim an exemption in relation to that assets.  For example, if you sell your car and then use the sale proceeds for a holiday you will no longer have a claimable exemption.

Another example where funds will not be exempt is receiving money for the replacement of property. If your car gets wrecked and insurance provides you with money to replace your vehicle, these are not exempt funds as they are associated with the replacement of an asset that previously existed that would have been shareable.

If you receive insurance proceeds for something that is not to replace an asset then it will be considered an exempt asset that need not be shared.  For example, if you receive funds as the beneficiary of a life insurance policy those funds will be considered exempt from distribution.

You must be able to trace the proceeds from the disposal of an exempt asset into an asset that current exists in order to maintain your exemption.  If you spend the funds on a non-tangible asset you will lose your exemption on the spent funds.  If you put any portion of the proceeds into a jointly held asset you lose half of your otherwise exempt amount.  The onus is on you to prove that you received the proceeds and to show that it still exists in some tangible form.

As an example, if you receive a $100,000 death benefit under a life insurance policy and then put those funds into an investment that still exists, you will be entitled to receive the first $100,000 from that investment without sharing.  Any increase in value will be subject to distribution in a “fair and equitable” manner.

If you received a $100,000 death benefit but only invested $80,000, with the other $20,000 being spent on non-tangible assets, this $20,000 will be considered “spent funds” and no exemption will apply.  You would still receive the first $80,000 from those insurance proceeds as exempt funds.

If you received a $100,000 death benefit, invested $80,000, and put the other $20,000 into a jointly owned home, your exemption would be the $80,000 put into the investment.   So long as you can show that the other $20,000 went into the jointly owned home you would receive an additional $10,000 exemption (you lose half the value of exempt funds put into joint assets).  The remaining $10,000 would be split in a fair and equitable manner.

If I bought and paid for everything, does my spouse still get an equal share?

If you are married, or if you are unmarried but did not separate until after January 1, 2020 then the rules set out in the Family Property Act relating to the division of property will apply.  Generally speaking, under these circumstances it is only in unique or exceptional  circumstances that you will receive more or less than half of the value of your property, with the exception of exempt assets.  

If you are unmarried and separated before January 1, 2020 the division of your property will be based on the level of each party’s contribution to the acquisition, preservation, maintenance and improvement of each asset, both direct and indirect.  Indirect contributions can include one partner staying home to care for children leaving the other with the ability to earn income to use in building up an asset base.

What if my spouse is hiding assets?

Part of the process of determining the extent of all of the property includes a requirement that each of you exchange financial documentation (called disclosure) that is relevant and material to the proceedings.  At the beginning you will each be required to provide simple disclosure like tax returns, pay stubs, bank, investment and credit card statements as well as a budget and a sworn statement that lists each of your assets and liabilities.

Following the exchange of this preliminary disclosure parties often voluntarily agree to exchanging further more in depth documentation.  You are also entitled to have your lawyer ask your spouse/partner questions under oath (called “Questioning”).  The Questioning is recorded by a court reporter who produces a transcript of the questions and answers.  At Questioning your spouse/partner will most likely be asked to produce further documentation and other disclosure (called “Undertakings”) and will have to do so within a reasonable period of time.  Your spouse/partner’s lawyer can Question you under oath as well and also ask for undertakings.

An Affidavit of Records may also be requested.  This is a document that lists all of the documents that are relevant and material to the divorce proceedings.  The document is sworn to confirm its accuracy and completeness.  You are then entitled to receive a copy of each of the documents listed.

The Questioning process assists by, among other things, allowing your lawyer to obtain further disclosure and allows your lawyer to “discover” more about the case and about your spouse/partner’s version of events.  The transcripts produced can be used later as evidence in the court proceedings.