Major Changes with New Family Law Act – Division of Property

Family Law

Major Changes with New Family Law Act – Division of Property

Family Law

Family law in BC has changed. The new Family Law Act received royal assent on November 24, 2011 and came into force March 18, 2013. The new Act has completely replaced the existing Family Relations Act. The change is not in name alone though. There are some substantive changes in the law that have come with the new Act.

If you are going through a separation or divorce or even considering living common law or getting married, it is essential that you obtain legal advice to find out how the change in the law could affect your rights and obligations moving forward.

One area of the law which has undergone a particularly radical transformation is matrimonial property division.

Under the old law, which remains in place for married couples who filed court pleadings prior to March 18, 2013, when a married couple separate, each spouse is entitled to a one half interest in all family assets. A “family asset” is most commonly property owned by one or both spouses that is ordinarily used for a family purpose. It also can include business assets that a spouse has directly or indirectly contributed to or an asset that is controlled by a spouse but not technically owned by that spouse. Where a standard division of family property would result in an “unfair” division of property given the length of the marriage or other relevant factors, the court will often make an exception and reapportion the property in favour of the appropriate spouse.

Under the new Act, the way that family property is determined and divided will be quite different. Courts will no longer have to decide whether a certain piece of property was “ordinarily used for a family purpose”. Rather, any property owned by one or both spouses will be considered to be family property, subject to equal division between the spouses. There will, however, be a number of classes of property that will be excluded from division.

One important class of property that will be excluded from the definition of family property is property that was acquired by one spouse prior to the parties cohabiting. For example, if John owned a house worth $1,000,000 when he moved in with Jane in 2005 and that house is now worth $1,400,000, only the $400,000 increase in value will be divisible between the spouses as family property. John will be entitled to retain the value of the home that he had at the time he and Mary moved in together. If this home was the only asset that John and Mary owned, then John would walk away from the relationship with $1,200,000 and Mary would walk away with $200,000.

Another notable class of property that will be excluded from division between spouses is property acquired by inheritance. Currently, there is often a question as to whether or not inheritance property is divisible, but the new law makes it quite clear that it is not. However, once inherited funds are received by a person in a marriage or common law relationship, any increase in value in the inherited funds during the course of the relationship is divisible between the spouses.

There are a number of other classes of excluded property that can be relevant to different family situations, and individuals should seek legal advice in order to determine what their pool of family assets will include.

As under the Family Relations Act, it will still be possible for a court to stray from the standard division that the Family Law Act would require if it would be significantly unfair not to do so. This is a somewhat higher standard than simply “unfair” under the old law.

Marital Status

Another very important change in the new Act is the inclusion of common law spouses in the definition of “spouse” for the purpose of property division.

Under the old law, the process for a common law spouse to claim an interest in his or her spouse’s property was time consuming and legally complex no matter how long or established the relationship was.

Under the new law, common law spouses who have lived together for over two years in a marriage like relationship will be entitled to claim the same interest in relationship property that married spouses are able to attain.

For some purposes, including claims of spousal support, couples who are in a marriage like relationship of less than two years but have a child together will also be considered spouses.

Agreements

Given the changes in the law of property division, it will be very important for couples to have either cohabitation or marriage agreements before committing to a relationship.

Having an idea as to what each spouse’s assets were worth at the time that cohabitation commenced is essential to determining the value of pre-relationship property that should be excluded from division at the end of a relationship.

One interesting result of the new law is that it seems to encourage agreements even if the parties do not intend their financial affairs to be any different than what the law would prescribe. This is because there is an emphasis put on the value of the assets that each party brought into the relationship. As one can imagine, it would be difficult to have the value of your pre-relationship property excluded from division of assets if there is no documentation as to what that pre-relationship property was worth. Historical valuations can be difficult and expensive to obtain and so valuing assets at the front end is essential.

The language of the new law seems to direct courts to more readily enforce marriage and cohabitation agreements than they do under the current law so long as the agreements conform with certain criteria specified in the Act. As is the case now, it strengthens an agreement significantly where both parties have competent legal advice.

Under the new Act, an agreement would have to be “significantly unfair” as opposed to simply unfair, before the court would set it aside.

Note: Post revised on October 16, 2013 to reflect the most current information regarding the new Family Law Act.

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