Introduction to Family Property & Excluded Property
There are two types of property under the Family Law Act of British Columbia (the “FLA”): “family property” and “excluded property”.
Family Property is essentially all property owned by either spouse or in which either spouse has a beneficial interest.
The FLA also describes certain categories of property that can be family property including:
- a share or an interest in a corporation
- a business or a venture
- property owing to a spouse such as a refund, including an income tax refund
- money in an account with a financial institution
- an entitlement under RRSP, RIF, pension plan etc.
- property that a spouse has control over and can direct its use or require to be returned and
- the increase in the value of excluded property since the relationship between the spouses began, or the excluded property was acquired.
The FLA then defines several categories of “Excluded Property” that is not to be included (in other words, excluded) from Family Property, including:
- property acquired by a spouse before the relationship between the spouses began;
- gifts from a third party;
- a settlement or an award of damages to a spouse as compensation for injury or loss, unless the settlement or award represents compensation for lost income;
- money paid or payable under an insurance policy lost income of a spouse;
- certain property held in trust to benefit a spouse;
- a spouse’s interest in property held in a discretionary trust
- property derived from property or the disposition of property referred to above
Presumption of Equal Entitlement to Family Property and Debt
Section 81 of the FLA provides that, on separation, each spouse has a right to one half interest in all “family property” as a tenant in common. Each spouse is equally responsible for all “family debt” regardless of the spouses’ respective uses or contributions. This right to one half of the “family property” is subject to a written or oral agreement or court order that provides for a different result.
It is only on the date of separation this right to the “family property” is created by the FLA. Similarly, the responsibility for the family debt also only begins on the separation date. However, the valuation of the family property rarely is determined on the date of separation. The value is usually determined at a later date – either by agreement or by a judge at trial. There can be significant issues arising out of any increase or decrease in the value of the family property since the date of separation and the time of its valuation. This is especially important if there unequal contributions to the increase or decrease in the family property value.
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