Share Home: The Division of Matrimonial Property

The Division of Matrimonial Property

When it comes to divorce issues, they don’t get much bigger than division of property. Governed by the Matrimonial Property Act in Alberta and the Family Law Act in BC, division of property involves a standard of halving all marital property and debts between the spouses. However, there are assets that do not require equal division because they’re considered exempt.

Exempt Assets may include the following:

  • Assets acquired by one party as an inheritance;
  • Gifts from third parties; 
  • Assets that were owned by one party prior to the marriage or relationship;
  • Proceeds received from an insurance policy; or
  • Award or settlement received from a tort claim. 

A common example of an exempt asset is when one party owned property prior to marriage – the value of the property at the time of marriage (or cohabitation) is not subject to division. Similarly, if one party receives an inheritance during the marriage, the value of the inheritance at the date it was received is considered exempt.

What if the property owner decides to add their spouse to the title of the property? The short answer: they lose a portion of their exemption. When a property is transferred into joint names, the original owner is only entitled to 75% of the value as an exemption, and the spouse 25%. For this reason alone, it’s worth getting legal advice before adding a significant other onto the title of a property you own.

So, what happens if an asset has increased in value since the date of marriage (or the date it was gifted) – is the increase in value divisible? In Alberta, the courts do not mandate an equal division of the increase in value of exempt assets, but advise that the increase in value “be shared equitably”. As such, if both spouses contributed to the value increase – say, both participated in the renovation of an exempt matrimonial home – then it is likely the increase will be subject to a more equitable share.

An important step in establishing exempt assets’ status is tracing exemption from the time of marriage until separation. For exempt property to be carved out of the divisible property, there must be evidence that said property still exists, or can be traced into another existing asset. Should the money from the sale of an exempt asset be spent on ongoing living expenses, the exemption is lost. If money from the sale of an exempt asset is deposited into an account containing joint funds and is used by both parties – again, the exemption may be lost. It is essential a property owner provide documentation that traces the funds from the exempt asset to their current status (including purchase, sale documents and bank records evidencing the transfer of funds). If exempt monies can be traced directly from one asset to another still in existence, it is likely that the value of the exemption will stand and can be deducted from the matrimonial property.

The legal team at Coach My Case has considerable experience in matrimonial property division, including exemptions. Get in touch today to ensure you get your fair share of the home.