DIVIDING FAMILY PROPERTY IN ALBERTA

The law in Canada about the division of family property is governed by each individual province and territory. This article deals with Alberta’s Matrimonial Property Act and only applies to residents of Alberta.

Matrimonial Property

In the eyes of the law, a marriage is an equal partnership and the law recognizes the equal contribution of each partner to the marriage. When a marriage ends, the economic partnership that was established by the marriage is over and the family’s assets have to be divided. To recognize the equal contribution of each spouse, the general rule is that the value of any assets that were acquired during the marriage and that still exist at the time of separation, must be divided equally. Property that either spouse brought with them into the marriage is theirs to keep. Any increase in the value of a couple’s assets during the marriage, however, must be shared. Note that the actual assets are not divided, it is the “value” of the assets, which is divided.

How Property is Divided

When a marriage ends, spouses must negotiate the final division of their assets and liabilities. If they can not negotiate this matter, they have no recourse but to apply to the courts and have a judge decide the matter for them.

The law tries to recognize the different ways in which spouses may have contributed to the relationship. In Alberta, the Matrimonial Property Act is divided into three main parts. The first part - Matrimonial Property - deals with the division and distribution of property between spouses. The second part -  Possession of the Matrimonial Home - deals with possession of the matrimonial home and use of the household goods. The third part of the Act deal with the general law of matrimonial property and the officially sanctioned court procedure for going through the process of property division.

Generally, matrimonial property in Alberta is divided equally - no matter whose name the specific asset is held in. There are some significant exceptions to this general rule which are described more full below.

Eligibility

For the Matrimonial Property Act to apply to your property division, you must be legally married to your spouse. The Act does not apply to people who have been living together in a common law relationship. You must also be a resident of Alberta for the Act to apply to you.

Section 3 of the Act deals with the issue of residency (where you live). For the Matrimonial Property Act to apply, you or your spouse must show the Court:

• That both you and your spouse currently live in Alberta whether or not you reside together and that your last joint residence was in Alberta; or
  

• Where you and your spouse have not established a joint residence since marriage, but you can show that you each resided in Alberta at the time of your marriage; or
  

• That either you or your spouse filed and issued a Statement of Claim for divorce in Alberta.

Section 5 of the Matrimonial Property Act talks about the conditions that must be met before an application under the Matrimonial Property Act is allowed. Almost all applicants will be able to meet at least one of the needed conditions. If you are not certain that you meet the above listed residency and marriage requirements, you should get legal advice.

Is Where is Your Property is Located Relevant?

With respect to real property or real estate, such as your matrimonial home, a court can only make decisions about property actually located in the province that you and your spouse currently live in, which, in this case is Alberta. However, when dividing the property, the court may also consider property which you and your spouse own and which is located outside of the province. For example, assume that Paul and Mary have decided to get a divorce. While married, Paul and Mary bought a house in Red Deer, Alberta, and a ski chalet in Vernon, British Columbia. The judge may decide to give Mary the house in Alberta, and, if the cabin in BC is of equal or greater value, Paul will likely get the cabin.

The Relationship of the Matrimonial Property Act and the Dower Act

It should be noted that the MPA does not replace the Dower Act. it only adds to it. The Dower Act only deals with the matrimonial home. It does not give the spouse who is not the registered owner the rights to half of the value of the home. The Dower Act requires the spouse who is not registered on the title to the matrimonial home to give their permission before the home can be sold, mortgaged, or otherwise encumbered. Also the Dower Act allows the spouse who is not a registered owner to live in the house they are alive after the registered owner (other spouse) dies. The Act does not replace any court ordered remedies that may be available, such as trusts.

Negotiating A Separation Agreement

The Matrimonial Property Act states that married spouses may negotiate a final, legally binding division of their property any way they want, provided they put the terms of the division into a written separation agreement. As part of this agreement each spouse must include the specific identification and valuing of each of their assets and liabilities. If you and your spouse can not agree between yourselves, the Matrimonial Property Act of Alberta sets out the law regarding the division of property which shall be applied in the event that you or your spouse apply to Court for a determination of the division of your property. Exactly how your property will be divided and in what proportions, will depends upon the specific circumstances of your case.

Procedure

An application for division of property under Part I of the Matrimonial Property Act can be made on its own or with an action for divorce, judicial separation, or annulment. Therefore, you can make an application if you have separated but not yet divorced or started to get a divorce. You can also bring an application under the Matrimonial Property Act for property division once divorce proceedings have started.

If you make your application for division of property while you are separated but not divorced, or if neither you nor your spouse have not started to get a divorce, the application for division of property must be made within two years after the date the two of you separated. You can get around this time limit by commencing your divorce proceedings. Keep in mind, however, that your application for property division must be made no later than two years after the date of the divorce judgment.

If you think your spouse might be giving away or selling property to a 3rd party to get around the provisions of the Act, you must start your divorce action within one year of the date your spouse gave away or sold the property. The Court has the power to stop your spouse from giving away or selling property and to order the spouse who is moving the property to pay the other spouse an amount equal to the value of the property being given away or sold.

An application under Part II for Matrimonial home possession, can be made at the same time as an application under Part I, on its own,  along with divorce proceedings, or along with an action under the Family Law Act. An order under Part II can be made without telling the other spouse (“ex parte”) if the court decides that there is danger of injury to the spouse asking for the application or danger to a child living in the home.

Part I Of The Matrimonial Property Act - Division Of Property

The basic principle behind the Matrimonial Property Act is that all matrimonial property should be divided equally between the spouses when a marriage ends. Matrimonial property includes all property acquired by the spouses while they were married. The increase in the value of property owned by the spouses is also included as matrimonial property. Generally speaking, a judge will divide all this property equally between the spouses, however, a judge will not do this if such a division would be unfair. When deciding what is fair the judge must consider Section 8 of the Matrimonial Property Act which will be discussed shortly. All property will be divided, unless it is classified as exempt property (property that does not fall within the Matrimonial Property Act rules).

1. Property which may be distributed under Section 7 of the Act includes, but is not limited to:

• The matrimonial home (owned, leased or rented);

• Household goods - this includes almost all personal property used by all family members;

• Vehicles including sporting related vehicles such as snowmobiles or boats;

• Other property that has been purchased during the marriage or brought into the marriage, if it has been used for the mutual benefit of the spouses

Other property which may be distributed between the spouses includes: Pensions, R.R.S.P.’s, business interests, investments, stocks and bonds.

2. Property which is exempt from distribution under Section 7(2) of the Act includes:

• Property belonging to one of the spouses that they owned before the marriage;

• Property one spouse has received as a gift;

• Property one spouse gets by inheritance;

• Monies from an award or settlement for damages as a result of a lawsuit – such as a personal injury lawsuit) unless the money is for a loss suffered by both spouses.

Exempt property (property that does not fall under the Matrimonial Property Act) belongs to the spouse who either brought the exempt property into the marriage or received it during the marriage.

To exclude exempt property from your family property, you must have kept these assets separate from your joint family assets during your marriage. You must also be able to trace where these funds have been and how they have been used from the day you received them. That means that if you used monies from an inheritance or personal injury award to purchase something, you must be able to show that it was this specific money that was used to purchase the item you wish to exclude. No claim by the other spouse can be made on this exempt property. If there is an increase in value of the exempt property, this increased value may be divided between the spouses. The only exception to this exclusion rule is the matrimonial home. You must include the value of a matrimonial home in your family property even if you used proceeds from a gift, inheritance or personal injury award to help pay for your home.

Pensions Are Included In Net Family Property Calculations

One of the most difficult aspects of family property division involves pensions. Most people don’t realize it, but most pensions are a significant family asset worth a considerable amount of money.

Pensions have special rules as to whether or not they should be considered as  "matrimonial property" under the Matrimonial Property Act of Alberta. A pension is considered property because it really is an individual’s right to receive money in the future. Even though the money has not yet been received, the value of the future right is considered an asset. It is the value of that entitlement on the date of separation that is considered an asset which must be valued for the purposes of property division.

Each spouse’s pension must be valued and the value included in their family property. Valuing a pension can a highly technical process. It is not something an individual can typically do for themselves or that their employer can do for them. It requires the involvement of a trained and qualified actuary. The best advice is to retain an actuary and provide them with your most recent pension statement. Let them know your date of marriage and date of separation. The actuary will provide you with a report which contains a number of scenarios of what your spouse’s share of your pension might be based on your possible retirement dates. The actuary will also take into account a deduction to reflect the taxes you will have to pay on your pension income. There are other adjustments that may be made depending on the type of pension.

Controversy about pensions arises because the pension holder is expected to account for the value of their pension in spite of the fact that they may never collect it. Unlike other assets, a pension does not have a fair market value because it cannot be sold and the pension holder cannot generally cash it in. As a result, the pension holder often feels that it is unfair to assign a cash value to the pension that he or she has to account for on equalization, when they might not see their pension monies for many years. On the other hand, if a spouse has RRSPs they can either cash them in or transfer them to the other spouse to satisfy an equalization payment.

Canada Pension Plan Splitting

Upon separation, the Canada Pension Plan pension credits which accumulated during a couple’s relationship are divided between both spouses. This division is called "credit splitting". The credits of the person who earned less are increased to match the credits higher earner.

Canada Pension Plan benefits are automatically transferred from one spouse to the other. Canada Pension Plan maintains proof of your pensionable earnings and contributions which escalate as you continue to pay into the Plan. The more credits you have, the larger your Canada Pension Plan benefit will be. The rationale behind this program is to provide some financial protection to the spouse who did not work outside of the home and could not contribute to the plan or had lower earnings during the marriage. 

If you want to have Canada Pension Plan credits divided, you should submit an application to your nearest Income Security Programs Client Service Centre. The following information should also be provided:

• The social insurance number of both parties;

• Birth or baptismal certificate of both spouses;

• Marriage certificate;

• Divorce or annulment papers; and

• The address of former spouse.

If some of this information is not available, do not delay your application. Contact your nearest Income Security Programs Client Service Centre and a staff member will assist you. Both parties will be told of the results of the application. If the division is approved, a notice showing the pensionable earnings credited before and after the division will be sent to the spouses or former spouses. The period for which the credits are divided begins January of the year the marriage ended, or of the year that the spouses stopped living together. Either spouse has the right to appeal the decision made.

If You Own a Business

If you own a business, the value of your business or of your share in a business must be included in the calculation of your net family property. Remember, it’s the value of your assets that are equalized, not the assets themselves. If you own a business, the value of the business will need to be calculated by a professional business valuator, and this value will need to be included in your net family property. Retaining a business valuator can be an expensive and complicated process, depending on the complexity of your business. Make sure that you consult with a lawyer to get the best possible advice.

Matters To Be Considered In The Distribution Of Property

Section 8 of the Matrimonial Property Act allows the Court to be fair in determining what each spouse’s share of property will be when an equal division of the property would be unfair. Under normal circumstance, an equal division of property will be ordered unless there are very good reasons presented to the Court that an equal division would be unfair. These are the guidelines to property division  which judges consider when spouses cannot agree on a split of the property:

• The contribution made by each spouse to the marriage and to the welfare of the family, including work as a homemaker, parent, farm labourer, etc.
  

• Contributions made by the spouse to any business, farm, or enterprise owned by one or both of them. This contribution could be financial or otherwise, made directly or indirectly, to acquiring, improving, or managing a property or a business.
  

• Contribution made by either spouse to the acquisition, conservation, or improvement of their property. This could be a financial contribution or otherwise, made directly or indirectly.

• The financial resources of each spouse at the time of the marriage and at the time of the trial. This could include income, earning capacity, liabilities, obligations, property, and other resources.

• The length of the marriage.

• Whether the couple obtained the property while the spouses were living separately.

• Any verbal or written agreement made between the spouses.

• Whether a spouse has given or transferred any property to a third party.

• Whether the property had been already transferred between spouses by gift, by agreement, or by court order.

• The terms of any previous court order.

• Any tax liability by one spouse which might result from the transfer or sale of property.

• Whether one spouse had wasted property to the other’s disadvantage.

• Any other facts or circumstances which a court may deem relevant. This last consideration gives the Court the right to consider just about any aspect of the marriage before coming to a decision, but most focus is generally placed on the other  factors.
  

Property Held Outside Alberta

Section 9 of the Matrimonial Property Act allows the Court to consider the effect of property held outside the province. The Court can distribute the property in Alberta in a way that ensures an equal distribution of all the property, in and outside of the province.

The following are examples of what the Court can consider and order:

• Transfers of property;

• Payments of money in a lump sum or in periodic payments as a substitute for the spouse’s share of the property;

• Security held for future payment;

• Release of Dower rights;

• "Any other order that in the opinion of the court is necessary”.

This last category allows the Court to make any order that it sees fit to ensure equal distribution of property under Section 7, even where only some of the property is located in Alberta. 

The “Matrimonial home” is defined in the Act as a house, part of a house, part of a business being used as a house, a mobile home, a condominium, or a suite. The home also includes as much property around the home as is needed. The house must be owned or leased by one or both spouses and must be occupied as the family home (i.e. it does not include a summer cottage). Though the Act does not expressly state it, the home must be located in Alberta.

The court’s power to order exclusive possession of the matrimonial home allows the court to deal with problems arising when the spouses cannot live together peacefully but neither is willing to leave the house. An order for exclusive possession order allows one spouse to keep the other out of the house. As stated earlier, a court order for exclusive possession of the  matrimonial home possession enforced by the court) can be applied for by itself or along with some other matrimonial action (i.e. divorce).

In deciding whether to grant an order for exclusive possession, the court will consider the following:

• Whether each spouse can find and maintain another place to live;

• The needs of any children who are living at home (e.g. will they have to go to another school if the parent with custody is not given exclusive possession of the matrimonial home?);

• The financial position of each spouse;

• Any existing court orders regarding the support and property of either spouse.

Courts generally do not order exclusive possession easily. The spouse applying for such an order must prove that the guidelines set out in the Matrimonial Property Act have been met. The spouse applying for the order must show something more than a balance of convenience, that is, it is not good enough to show that one spouse does not like the other person being there. If there is a history of violence in the home, this may also affect the granting of the order.

In granting the order the Court may do one or more of the following:

• Direct that a spouse be given exclusive possession of the home (regardless of whose name the property is in);

• Direct that a spouse be evicted from the matrimonial home;

• Stop a spouse from entering or going to the matrimonial home.

Under the Matrimonial Property Act, the Court can only grant an order preventing a person from entering or visiting the home. The Court cannot stop one spouse from harassing the people in the home on the telephone or harassing them outside the home. If this happens, you may wish to apply for a restraining order along with a divorce action. However, to get the restraining order, you will have to show a real or suspected danger to your safety. An order for possession may even include conditions. For example, the wife could be given exclusive possession of the house with the condition that the husband must make the mortgage payments.

A spouse can apply to the court without telling the other spouse (“ex parte”) but this will only be done if it can be shown that there is an urgent need, such as danger to the health and safety of the spouse or the children, from the continued presence of the spouse to be excluded.

A spouse can also apply for an order giving them exclusive use of the household goods. “Household goods” are defined in the Act as personal property owned by at least one of the spouses and used or enjoyed by either spouse, or the children, for transportation, household, educational, recreational, social, or aesthetic purposes. Household goods include motor vehicles, furniture, and appliances. The Court can make this order for any time that the Court thinks necessary. All orders granted under this part should be registered with the appropriate registry: Motor Vehicles for cars, Land Titles for houses, Central Registry for household goods. Once the order is registered, the home or goods cannot be sold unless the spouse who was granted the order agrees.

Part III Of The Matrimonial Property Act - General Provisions

Marriage and separation agreements

If you agree with your spouse, either before or after the marriage, as to how the property will be divided between you if you separate or divorce, you should know that there are conditions that must be met before such an agreement will be enforced by the Courts. To be valid the agreement must:

• Be in writing;

• Have been entered into freely and not have been forced by the spouse or some other person;

• Show that each spouse had Independent Legal Advice about the consequences of signing the agreement. That means that each spouse must have the agreement explained to them by their own lawyer and sign it in the presence of that lawyer execute the agreement with a different lawyer. 

Creating a separation agreement will allow the parties to contract out of the provisions of the Matrimonial Property Act. That means that the spouses have the right to decide that they do not want the Act to apply to their property. In order to make an informed decision about contracting out of their rights under the Matrimonial Property Act each spouse must know of the future claims to property that they may have under this Act and must want to give up these claims and replace them with a new agreement.

The Court will not enforce an separation agreement that it considers “unconscionable”, that is extremely unfair. An agreement would be unconscionable, for example, if one spouse was unable to properly protect their own interests because they could not afford legal advice. An agreement would also be considered unconscionable if a spouse has a mental or physical problem and can therefore not understand the effect the agreement has on their rights, or in a situation where one spouse has not told the other about all his/her assets/property, or where the other spouse has taken advantage of the ‘weaker’ spouse.

If any of these factors are shown to the Court, then the Court will have the power to ignore the agreement altogether and make its own decision. However, if the agreement is valid, then it will be considered a binding contract.

Conclusion

The legal rules that you have to follow to calculate the value of your property and divide it between you and your spouse can be complicated. It is a good idea to protect your interests and consult a lawyer about how the law and the rules apply to your particular case. It is strongly advised that anyone contemplating a division of marital assets meet with a lawyer to learn their rights prior to discussing a division of assets and liabilities with their spouse. A legal opinion will arm a client with a knowledge of their rights, some general income tax advice and an explanation of the steps which are required to ensure to complete the division in a final, binding manner.

Please note that the information is general in nature and not intended to be a substitute for legal advice. If you are concerned about how to divide your family property following the breakdown your marriage or common law relationship, please contact a lawyer. You can get free information about how to select and retain a lawyer by getting a copy of the FREE REPORT offered at the top right-hand corner of this page. Do not sign a separation agreement without independent legal advice.