Pursuant to the new Family Law Act, spouses share their property and their debts equally on separation. The only exception to this is if one or both spouses have what is called “excluded property.”
Section 85 of the Family Law Act states:
85 (1) The following is excluded from family property:
(a) property acquired by a spouse before the relationship between the spouses began;
(b) inheritances to a spouse;
(b.1) gifts to a spouse from a third party;
(c) a settlement or an award of damages to a spouse as compensation for injury or loss, unless the
settlement or award represents compensation for
(i) loss to both spouses, or
(ii) lost income of a spouse;
(d) money paid or payable under an insurance policy, other than a policy respecting property, except any portion that represents compensation for
(i) loss to both spouses, or
(ii) lost income of a spouse;
(e) property referred to in any of paragraphs (a) to (d) that is held in trust for the benefit of a spouse;
(f) a spouse’s beneficial interest in property held in a discretionary trust
(i) to which the spouse did not contribute, and
(ii) that is settled by a person other than the spouse;
(g) property derived from property or the disposition of property referred to in any of paragraphs (a) to (f).
(2) A spouse claiming that property is excluded property is responsible for demonstrating that the property is excluded property.
If a spouse has excluded property it must be “traceable” to an asset which still exists at the date of separation. For example, if one spouse had $100,000 in savings at the date the spouses started living together, that spouse can only now claim the $100,000 as their separate property if the $100,000 still exists in some form. It may have been used as a down payment on the family residence or it may be in an investment or RRSP account. The spouse claiming the exclusion must produce documents which “trace” the property from the date of cohabitation to the date of separation as the onus is on the spouses claiming the exclusion to prove it. If the $100,000 was used by the family to pay debts or to go on a vacation the money no longer exists and the exclusion is lost.
Proving the excluded property existed can be extremely difficult especially if the spouses have been together for many years as banks typically only keep records for approximately seven years.
If one spouse owned a business when they started living together, that spouse must prove the value of the business at the date of cohabitation. This can be done by a business valuator but only if the financial statements for the business still exist.
Family Law Act, [SBC 2011] CHAPTER 25
