Upon separation, the Family Law Act entitles each spouse to claim and receive one half of the family property and debt. Family property is a broad category and in most cases it will include everything owned by either spouse on the date of separation. It even includes property acquired by a spouse after separation if it is derived from an asset that was family property.
The FLA also includes specific exclusions which, if proven, can prevent the asset from being divided between the spouses. The general idea behind excluded property is that spouses are allowed to retain what they have brought into the relationship, but share the property and debt that accrued during their time together. This approach is viewed as aligning with the general public’s understanding of ‘fairness.’
Property that may be excluded is a varied list. Potential exclusions include property acquired by a spouse before the relationship between the spouses began; inheritances to a spouse; gifts to a spouse from a third party; and a settlement or an award of damages to a spouse as compensation for injury or loss.
Importantly, property will only be excluded if one party makes a claim for exclusion and they are successful in demonstrating that the property actually merits exclusion. The test for establishing an excluded property claim was set out in Shih v. Shih, 2017 BCCA 37, where the court held that the burden of proof is “the same as in any civil case – proof on a balance of probabilities.” To do so will require “clear and cogent evidence” preferably in documentary form. However, “if documentary evidence is not available, the party bearing the onus of proof will need to testify as to their recollection of the transactions in dispute. That evidence will be scrutinized for credibility.”
Excluded property claims get even trickier to prove when it comes to tracing a claim through the original item and subsequent assets. The law in this regard is still developing. As the court in Zellweger v. Zellweger, 2018 BCSC 1227, pointed out, the process of tracing excluded property ranges from simple to complex, and when excluded property co-mingles with other property and the value of the asset depreciates, the party claiming the exclusion may not be able to claim the full value of the excluded property at the start of their relationship. Ultimately, formal tracing rules are not applicable in every case; rather, the statutory language of s. 85 of the FLA allows for a more flexible approach to identifying excluded property than would the formal rules of tracing.
Property division can be one of the most stressful parts of separation. It is often a real challenge to determine what, if anything, you are rightfully able to claim as excluded property. If you have any questions about what these rules mean for you, contact the lawyers at Cleveland Doan LLP today.
This article is intended for information purposes only and should not be taken as the provision of legal advice. Richard A. Cleveland is lawyer whose practice focuses on family, wills and estates, and employment law. He is a partner with the law firm of Cleveland Doan LLP and can be reached at (604)536-5002 or firstname.lastname@example.org.