BC Property Debt Division & Family Property Valuation

What is family property and what is family debt?

Family property is everything that you or your spouse own separately or together on the date you separate. It does not matter whose name the family property is in. Family property is presumed to be shared equally between the spouses, regardless of their use of or contribution to that property, and subject to excluded property, discussed below.

The Herr Law Group team has extensive experience in complex property debt division and will help you navigate the categories of family property.

Family property includes the following:

• The family home;
• RRSPs;
• Investments;
• Bank accounts;
• Insurance policies;
• Pensions;
• An interest in a business;
• The amount of any increase in the value of excluded property since the relationship started.

Just as spouses accumulate assets during the marriage, they may also accumulate debt. Section 86 of the Family Law Act describes family debt to include all financial obligations incurred by a spouse, during the period from when the relationship began, to when the spouses separate, and after the date of separation if incurred for the purposes of maintaining family property.

What is excluded property?

Alongside family property, the Family Law Act provides for “excluded” property. Excluded property refers to property that each spouse had prior to the relationship, or in some cases certain assets acquired during the relationship. For property that each spouse had at the beginning of the relationship, the value of that property at that time is excluded from family property. For excluded property acquired during the relationship, it is the value of the property at the time of acquisition.

However, any increase in value of excluded property during the relationship becomes family property and is shared. As well, a spouse that is claiming excluded property will be required to prove that property is excluded.

The following are examples of excluded property:

• Property acquired by a spouse before the relationship between the spouses began;
• Inheritances to a spouse;
• Gifts to a spouse from a third party;
• A settlement or an award of damages to a spouse as compensation for injury or loss;
• Money paid or payable under an insurance policy, other than a policy respecting property, representing compensation for lost income of a spouse;
• Property referred to any of the above that is held in trust by someone else for the benefit of a spouse;
• A spouse’s beneficial interest in property held by a discretionary trust, where that trust is both set up and funded by someone else;
• Property derived from the above.

How do business and financial assets figure?

A valuation of the family business or businesses is usually required when either or both separating spouses have a business, professional practice or partnership interests. In cases of highly profitable professional practices, partnerships, and companies, spousal and child support will often be paid from the business income generated.

Valuations require expert evidence, and can be complex. It’s in the business owner’s best interests to consult with the experienced BC Family Property Debt division lawyers at Herr Law Group.

How do I protect real property (land, houses) from being sold or borrowed against before trial?

At Herr Law Group, our legal experts have robust tools to ensure family property is not disposed before trial. Lawyers can file charges on land, whether a house or commercial property, to ensure that no transfer occur without parties’ written agreement or court order. The court can also reverse a transfer to a third party that has already occurred, whether before or after separation, if the court believes the transfer is being made to wrongfully interfere with the other spouse’s interest in the property.

As well, the court can make a “compensation order” from other assets to repay a spouse for property transferred away to frustrate the spouse’s interest in the property.

We ensure business and professional ventures are not impaired from success during or after a marriage breakdown. The best way to protect your property is to enlist a legal team highly experienced in BC family property division.

How can I find out if my spouse has hidden assets?

Despite the abundance of provisions under the Family Law Act and Supreme Court Family Rules making disclosure of assets and income compulsory, it is unfortunately common that spouses fail to disclose assets or income, in an attempt to defeat the other spouse’s claims for property division and support.

Herr Law Group has extensive experience in all the practical and legal techniques to discover hidden assets and hidden income, including seeking an “adverse inference” against the other spouse at court, which may include the court determining that the value of assets is in fact double what the known assets is, or imputing income far beyond what the spouse reports.

Our wins on freezing hidden property, imputing income and obtaining penalties and special costs are precedent setting.

How is property divided when we separate or divorce?

BC family property division and debt resolution can be accomplished either by negotiated agreement or through the courts. A court normally divides family property equally. A court may divide family property or debt unequally only if it would be “significantly unfair” to divide it equally. The court can look at a number of factors when deciding whether to divide property or debt unequally.

To give effect to that division, in cases of separating spouses that own a family business for example, options include the following:

• One spouse buys the other spouse out immediately, or over time;
• The business is listed for sale and the proceeds from the sale are divided;
  The non-owning spouse becomes a “silent partner” or a shareholder who might receive dividends but is not involved in operating the company;
• Where both spouses, despite separation, work well together, they may agree to maintain joint ownership of the business;
• If feasible from a business perspective, divide the company into two separate companies, with each spouse owning and operating their separate company.

Just as there are many families with different kinds of property, there are many different ways to divide property and to give effect to that division. MacLean Family Law’s goal is to steward you along the path best-suited to your unique family circumstances, to help you reduce costs, optimize your financial health, minimize conflict, and move forward to a fruitful life following your separation or divorce, free from bitterness and regret.

Are there time limits to property division?

The division of family property must occur within prescribed time limits. For married spouses, they must apply to court for property division within two years of being divorced. For unmarried spouses, a separation date begins the two-year period to claim.

It is prudent for both spouses to have a very clear understanding of the expiration date to apply for property division, as they may lose their remedies if they do not apply to court in time. Do not leave this crucial step of the separation process until the last minute. Herr Law Group’s BC Family Property Debt Division team will advise and prepare your property division case in order to safeguard and sustain your financial well-being.

Are the property division rules different in other provinces?

Property division rules vary province by province and often the differences apply to common-law relationships. In BC, common-law couples living together continuously for two years or more have the same property division rules as legally married couples.

The Matrimonial Property Act of Alberta has specific guidelines for the division of property of legally married husband and wife in the process of divorce. Each spouse keeps the property they owned before the marriage, but probably will split any increases in value during the marriage.

For marriage-like relationships in Alberta, unmarried couples must live together for three years for their relationship to be considered common-law. However, property division does not apply in the event of separation, but there is legislation for child and spousal support.

What happens to property owned outside Canada?

In BC family property division, extraprovincial property is becoming more common, due to the increase in Canadians in BC from other provinces, as well as those who have immigrated to BC from other countries. Family property that is owned outside of BC (also known as extraprovincial property) can make a separation more complicated, as that property is subject to another jurisdiction’s laws.

Where the family property is land located in another country, courts cannot make an order that the legal title of the property be transferred to the other, non-owning spouse, because that would be an order against the foreign country, about that foreign country’s land. However, the court can do other things, including the following:

• Transfer to the spouse without legal title to the extraprovincial property, other property within BC that has an equal or greater value to the extraprovincial property;
• Require the spouse with the legal title to the extraprovincial property to pay compensation to the other spouse.

Also, if the family property in another country is not land, but “moveable” assets such as bank accounts or other financial holdings, then the BC court can make orders to divide that property, as that is not an order against the foreign country about its land. However, as other countries have various and different laws, due consideration will be needed to determine whether this would be enforceable in the foreign country, and in some cases, the above methods of transferring property within BC or ordering compensation may be more practical.

It is recommended to seek legal advice where there are properties outside BC, and outside the country. Herr Law Group’s BC family property division team is highly experienced in the division of worldwide international family property holdings.