DIVIDING FAMILY PROPERTY IN BRITISH COLUMBIA

Canadian law regarding the division of family property is determined by each individual province or territory. This article deals with British Columbia’s Family Reations Act and only applies to residents of British Columbia.

If You Are Married

The division of assets between married spouses is governed by Parts 5 and 6 of British Columbia's Family Relations Act. Part 5 of the act deals with the division of property, including personal property, financial assets and real estate. Part 6 deals with the division of pensions. Unmarried or common law couples, are excluded from the parts of the Family Relations Act that deal with property. If you are a part of an unmarried couple and have separated, you must apply to the Court and seek property-related relief through the Law of Trusts. Generally, unmarried couples receive far less of each other's assets than they would had they been married.
                                                                                                                                                                         
What is a Family Asset?

Family property consists of all assets owned by you and your spouse and used for your family’s purposes. This includes all assets such as the family home and its contents, bank accounts, insurance policies, RRSPs, and pensions. If you are legally married, you are entitled to one half of all the property acquired and used by the family during your marriage without proving that you made any contribution to the acquisition of that property. It should be noted that the definition of "a family asset" focuses on how the asset was used rather than on who bought it or when it was bought. Specifically, property owned by one or both spouses and ordinarily used by a spouse or a minor child of either spouse for a family purposes is a family asset.

"Ordinary use" means that the asset was used in the course of the family’s customary or daily life rather than a special, occasional or casual use. An occasional or incidental use for a family purpose does not automatically turn an asset into a family asset. Occasional use, however, coupled with an intention to use the asset for future family purposes may lead to the finding that the asset is a family asset.

Family Assets include:

• Savings accounts, if the money has been ordinarily used for family purposes.

• The right of a spouse under an annuity, pension, homeownership or RRSP.

• A right, or interest in a business venture if the spouse contributed money or other value (such as labour) to the business.

• Shares in a corporation or interest in a trust, if the corporation or trust owns property that would be considered a family asset if owned by a spouse.

• Property over which one spouse has a power of appointment in favour of themselves, as well as the power to use, the power to dispose of, or the power to revoke an earlier disposition of the asset if the property would be a family asset if owned by a spouse.

Property owned by one spouse is not considered a family asset if it primarily has been used for business purposes and if the non-owning spouse made no direct or indirect contribution to either the acquisition of the asset or the operation of the business. An indirect contribution can include labour provided by the spouse to the business for little or no remuneration, or the savings achieved by a spouse providing housekeeping or taking care of the family's children.

Triggering Events – When are Assets Divided?

When a marriage breaks down, the spouses are presumed to own all family assets equally, no matter whose name the asset is in or whether the asset was owned by one spouse prior to the marriage or whether the asset was bought during the marriage by either one or both of the spouses.

The property division provisions for married couples of the British Columbia Family Relations Act take effect when one of the following four triggering events takes place:

1. The parties make and sign a separation agreement.
2. The court makes a declaration that the spouses have no reasonable prospect of reconciling and resuming married life.
3. The court makes an order for divorce.
4. The marriage is annulled.

As soon as one of these triggering events occurs, there is a presumption that all “family assets” are to be divided equally between the spouses. The division of assets and property can take place by way of the sale of property and division of the proceeds of the sale, transferring the ownership of assets, or by the court ordering one spouse to retain property upon paying compensation to the other spouse.

Exceptions to Equal Division of Family Assets

If an equal division of the family assets would be unfair, the court may reapportion the assets unequally. How would a court determine whether an equal division would be unfair? Section 65 of the Family Relations Act sets out the conditions under which an equal division of family assets would be unfair. These include:

• If you owned what is now the family home or had considerable savings before your relationship with your spouse.

• If you were married for only a short time.

• If the asset in question was not used by the family.

In making its decision that an equal division would be unfair, the court will take the following factors into consideration:

• The duration of the marriage.

• The duration of the period during which the spouses have lived separate and apart.

• The date when property was acquired and / or disposed of.

• Whether the property was acquired by either spouse as an inheritance or gift.

• The ability of each spouse to become or remain economically self-sufficient.

• Any other circumstances relating to the acquisition, preservation, maintenance, improvement or use of property or the capacity or liabilities of a spouse.

What are "any other circumstances"?

“Any other circumstances” that the court may consider in deciding on an unequal division of family assets include:

• Lack of contribution by one spouse to the acquisition of the specific family asset being considered for unequal division.

• One spouse's contributions made to the acquisition of an asset before marriage.

• Whether the asset was improved, preserved or maintained solely through the efforts of one spouse.

• The extent to which assets were used or depleted by either of the spouses prior to the trial.

• Whether one spouse has the responsibility to provide a home for the children of the marriage.

• Whether one spouse has had the exclusive use of the family home after separation.

• A spouse’s physical or mental capacity.

Additionally, although division of property and spousal and /or child support are separate issues, and the court will typically divide property before considering support, the intention and ability of a spouse to pay support may be taken into account by the court in determining the fairness and reapportionment of assets.
 

Are Family Debts Also Divided?

The Family Relations Act does not provide for the division or reapportionment of debt, but the liabilities of either spouse may be taken into account in evaluating fairness and in reapportionment.
 

What is NOT Relevant in Dividing Assets?

The following factors are not relevant to the court's determination of fairness in the division of assets:

• The conduct of the spouses.

• Contributions by each spouse to day-to-day living expenses.

• The fact that a spouse has less money on dissolution of the marriage than at the time of marriage.

• The fact that there are no children of the marriage.

• One spouse’s temporary inability to work.

• The actual registered ownership of the family asset.

Employer Pensions

One of the most difficult aspects of family property division involves pensions. Most people don’t realize it, but many pensions may be a significant asset worth a considerable amount of money. 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 by an actuary and the value included in their calculation of their net family property. Valuing a fixed benefit pension is a highly technical process. It is not something you can do for yourself or that your employer can do for you. 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 both 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.

In the case of pensions, the Family Relations Act provides for the deferred sharing of the pension benefits accrued during the marriage; pension benefits are not divided until the parties actually retire. Employer pensions can be divided between you and your spouse after a separation or divorce. You must apply to divide an employer pension within two years of a court order granting a divorce, annulment, or judicial separation.  Many people apply to divide family property, including pensions, at the time they start their divorce proceedings.

RRSPs

Normally, if you wish to cash out an RRSP, you must pay tax on the RRSP as if the RRSP was taxable income, like employment income. Under the federal Income Tax Act, transfers of RRSPs between spouses are tax neutral, under what is called the "tax-free spousal roll-over" provisions of the act. The federal Income Tax Act provides for a “rollover” permitting RRSPs to be transferred from one spouse to the other without any income tax becoming payable. However, you will need a court order or written separation agreement to provide to Canada Customs and Revenue in order to substantiate your claim for  tax free rollover.

Canada Pension Plan Credit Spitting

When a relationship ends, the Canada Pension Plan (CPP) pension contributions that a couple made while they lived together can be shared equally between them. This division is called credit splitting. You must ask to have CPP credits split. To qualify, you must have lived together for at least one year (either common-law or married). If you are divorced or have had your marriage annulled, you can apply for credit splitting at any time (there is no deadline)If you were living common-law, you can apply for credit splitting after you have been separated for one year. You must apply within four years of the date of separation. You get more information about CPP credit splitting on separation or divorce, from this Human Resources Canada website.

Medical and Dental Plans

Married spouses and children under 19 can still be covered by a working ex-spouse’s provincial medical coverage after separation. If you get divorced, however, you are no longer a spouse and therefore no longer covered. You will have to apply for separate coverage for yourself. If your ex-spouse has an employer benefits plan that covers other medical and dental expenses, you and your children may still be covered even after a separation. To make sure you and your children are still covered, have your spouse contact the insurer who administers the medical / dental benefit plan.

If you do get divorced, many employer-sponsored benefit plans will terminate your coverage, but not your children’s. Have your spouse contact the insurer who administers the medical dental benefit plan to find out what it does provide post-divorce. You may want to take this into account when discussing spousal support.

If your ex-spouse cancels medical and dental coverage for you or your children even though their work benefits plan makes coverage available to children and separated spouses, the court can order that the plan continue. The court, however,  cannot order the plan to provide coverage if its terms allow it to end coverage upon a divorce.

IF YOU WERE LIVING IN A COMMON-LAW RELATIONSHIP

Property

The law about how assets and property are to be divided when a marriage ends does not apply to you if you were in a common-law relationship. Unless a common-law couple has made a cohabitation agreement which sets out how they will manage or divide their assets, there is no legislation that applies to the division of their property. Persons leaving a common-law relationship may have to prove that the other partner has been unjustly enriched before they can obtain a share of assets owned by the other party. This involves showing that you contributed to the property or asset, or that you contributed to the household expenses, or that you maintained the home and looked after the children, giving the partner the opportunity to work and acquire the property. This concept falls under the law of “constructive trust.”

You can apply to the court to divide property with your common-law partner even if you lived together less than two years. The laws about property are complicated, however, and there are important time limits. so it is important to consult with a lawyer to get advice about what the best course of action for you will be.

Employer Pensions

If you lived in a common-law relationship, you will have to prove you that you contributed directly to your ex-partner’s pension in order to successfully claim a share of it. A lawyer can help you if this is the case in your sitution.

Medical / Dental Plans

If you were covered by your working common-law partner’s provincial medical coverage, you should, as soon as you separate, ensure that you apply for separate coverage for yourself. Your children may still be covered on the other parent’s plan. If your ex-partner has an employer- sponsored benefits plan that covers additional medical and dental expenses, you and your children may still be covered even after a separation. To make sure you and your children are still covered, have your common-law partner contact the insurer who administers the medical / dental benefit plan.  If your ex-partner cancels medical and dental coverage for you or your children, even though their work benefits plan makes coverage available to children and separated common-law partners, the court can order that the plan continue. However, the court cannot order the plan to provide coverage if its terms allow it to end coverage when the relationship ends.

Please note that this information is general in nature and not intended to be a substitute for legal advice. If you are concerned about the division of 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 on this page. Do not sign a separation agreement without independent legal advice.