The Family Law Act of B.C. sets out a regime whereby a spouse can retain the benefit of assets that they either owned prior to the relationship or that they inherited or had gifted to them during the relationship. This is called “excluded property” because it is excluded from property which is to be shared by the spouses on their separation.
The spouse claiming the excluded property must be able to prove that the excluded property still exists at the date of separation. This is called tracing and is usually done by providing bank records or other documents that show where the money has been from the date the relationship began to the date of separation.
If the money was used to purchase a home which was registered in both spouses names as joint tenants the exclusion may be lost. If the money was spent by one or both of the spouses to pay debts or other expenses the exclusion is lost. Also if the money was invested in an asset which has decreased in value over time the spouse can only claim the value of the excluded property that remains.
One of the most complicated situations that can arise is when one spouse places excluded money in a bank account that contains other funds. The account is then used by the family but the spouse claims that the remaining funds in the account are “excluded.” The other spouse may argue that the excluded funds were spent and the remaining funds are family property.
In any event the onus is on the spouse claiming excluded property to prove it still exists. If they can’t do this it will be divided equally between the spouses.
Deborah A. Todd
