When a spousal relationship ends, the division of property and debt is governed by the Family Law Act. The Act applies to both married spouses and unmarried spouses who have lived together in a marriage-like relationship for at least two years.
1. Equal Division: The General Rule
The starting point is that all family property and family debt are divided equally (50/50) between spouses, regardless of whose name is on the asset or debt, or who contributed more financially. This presumption applies unless the parties have a valid agreement stating otherwise, or unless equal division would be “significantly unfair”.
2. Categories of Property
A. Family Property
Family property includes all real and personal property owned by one or both spouses at the date of separation, except for excluded property. It also includes the increase in value of excluded property during the relationship. Examples include:
- The family home (regardless of whose name is on title)
- Bank accounts, investments, RRSPs, pensions
- Businesses or business interests
- Vehicles, art, and other significant items
- Debts incurred during the relationship (e.g., mortgages, credit cards)
B. Excluded Property
Excluded property is not subject to equal division, but any increase in its value during the relationship is family property and is divided equally. Excluded property includes:
- Property acquired by a spouse before the relationship began
- Gifts or inheritances received by one spouse from a third party
- Certain personal injury settlements or insurance proceeds (unless for both spouses or lost income)
- Some types of trust property
The spouse claiming an exclusion bears the burden of proof. If excluded property is transferred into joint names, recent amendments clarify that the exclusion is generally preserved, but tracing and intention remain important.
3. Family Debt
Family debt includes all financial obligations incurred by either spouse from the start of the relationship to the date of separation, and debts incurred after separation if used to maintain family property. Both spouses are equally responsible for family debt, regardless of whose name is on the account.
4. Unequal Division
A court may order an unequal division of family property or debt if equal division would be “significantly unfair,” considering factors such as:
- The duration of the relationship
- The terms of any agreement between the spouses
- A spouse’s contribution to the other’s career
- Whether family debt was incurred in the normal course of the relationship
- The ability of each spouse to pay a share of the debt
- Post-separation changes in value due to one spouse’s actions
- Tax consequences of division
5. Agreements
Spouses may contract out of the default rules by entering into a written agreement (e.g., marriage agreement, cohabitation agreement, or separation agreement). Such agreements are generally binding unless set aside by the court for reasons such as lack of disclosure, duress, or significant unfairness.
6. Process for Division
- By Agreement: If spouses agree, they can set out the division in a separation agreement.
- By Court Order: If no agreement is reached, either spouse may apply to the Supreme Court for an order dividing property and debt.
- Time Limits: Claims must be brought within two years of divorce (for married spouses) or separation (for unmarried spouses).
7. Special Considerations
- Companion Animals: As of January 2024, the court may make orders regarding ownership of pets, considering factors such as care and relationship to children.
- Property Outside BC: The court may make orders regarding property outside the province in certain circumstances.
- Tax Implications: Division of certain assets (e.g., RRSPs, real property) may have tax consequences, which should be considered in settlement or court orders.
Ready to start the divorce process? Take the first step and schedule your appointment with Northam Law today. Contact us via phone at (604) 630-2350 or email us at admin@northam-law.com.
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