Separation and divorce are significant events in anyone’s life, and navigating the legalities surrounding property division can feel overwhelming. In Alberta, the provincial Family Property Act (FPA) guides the property division process. When spouses divorce, as a general rule, the courts will typically divide all net family property equally between the parties. However, if one spouse receives property that is worth more than their share of the division of net family property, they may be required to make an equalization payment to the other spouse to ensure there is a fair distribution of assets. Issues can also arise if a spouse claims that certain property is exempt under the Family Property Act.

This blog post serves as a roadmap to the family property division in Alberta. It outlines the general principles of property division and what property may be considered exempt from division. It will also explore how parties can proactively manage property division matters through domestic agreements.

The Default Rule for Family Property Division

Under the provincial Family Property Act, there is a presumption that all property acquired by either spouse during the relationship will be divided equally between the parties. The term “family property” is understood to include all property regardless of which spouse’s name the asset is in. Family property includes real property, vehicles, investments, pensions, bank accounts and other valuable possessions. However, there are exceptions to the default rule.

Property Division Exemptions

Section 7(2) of the Family Property Act provides that there are four primary categories of exempt property which are not divisible upon separation or divorce. These categories are:

• Gifts from third parties and inheritances;
• Property owned by one spouse prior to the commencement of the relationship;
• Proceeds of a life insurance policy; and
• Proceeds of a judgment or settlement arising from a tort claim.

How Exempt Property Can Lose Its Status

There are certain exceptions to these exemptions. For instance, any growth in the exempt property may be considered as divisible family property. Adding a spouse to the title of an exempt asset will also reduce the exemption. Moreover, if the exempt property is not maintained in a traceable or identifiable form, then its exempt status may be lost. Finally, the party seeking to enforce the exemption bears the onus of proving that the asset in question falls under the exemption.

When an exempt asset is mixed with non-exempt assets, such as in cases of long-term relationships, issues can arise. For example, if a property owned by one spouse prior to the relationship is sold with the equity put into the new jointly owned property, it can be difficult to trace the initially exempt property. In other cases, funds from a legal settlement or inheritance that are used to purchase property or pay off debts, which can result in a loss of the exemption.

For these reasons, entering into a cohabitation or marriage agreement can help identify the property that will or will not be divided between the parties if the relationship breaks down.

Sections 37 and 38 of the Family Property Act outline the specific requirements for such agreements to ensure their enforceability. The default rule of equal property division may be displaced when parties enter a valid and legally binding domestic agreement.

Valuing Exempt Property

Spouses often disagree on how to value the property when dividing assets. In Alberta, the value of exempt property is generally based on the asset’s market value at the commencement of cohabitation or the time of marriage (whichever is later). If the asset increases in value during the relationship, your spouse may receive up to 50 percent of the increase in value.

Final Thoughts on Property Division in Alberta

Determining what property division exemptions you may have can be confusing, particularly if exempt assets have co-mingled with other property. If you can establish that you used an exempt asset to purchase an asset still owned by you, you can claim the exemption. However, the exemption may be lost if the exempt property has been sold and you cannot show where the funds went.

Navigating the issues stemming from separation and divorce can be overwhelming, particularly when issues relating to property division and asset exemption arise. Consulting with an experienced family lawyer can help you understand what property division may look like. A family lawyer can clarify and guide you to obtain the best possible outcome. Working with a family law early in a relationship can also help you take proactive steps towards property division issues, as preparing a cohabitation or marriage agreement allows both parties to have a say in what will happen to their assets upon a breakdown in the relationship.

Contact the Family Lawyers at Getz Collins and Associates for Advice on Family Property Division

The trusted and experienced family lawyers at Getz Collins and Associates frequently advise clients on various issues arising out of a separation or divorce. We help clients resolve issues relating to support claims, parenting arrangements, and property disputes. Whether you are seeking to proactively protect your assets, or have questions about property exemptions, our family lawyers are ready to help.

From our offices in Calgary and Strathmore, our family lawyers represent clients across Alberta. To schedule a confidential consultation with a member of our family law team, contact us by phone at (587) 391-5600 or complete our online questionnaire.