Dividing Property After Divorce in BC: The Proof is in the Puddin’

The Family Law Act was meant to simplify property division on divorce in British Columbia. So far in practice, it seems to have had the opposite effect. Vancouver family lawyers are finding it more difficult to advise spouses of their legal rights and obligations on divorce.

In July 2010, the Ministry of Attorney General Justice Services Branch Civil Policy and Legislation Office published the “White Paper on Family Relations Act Reform” (the “White Paper”). The White Paper helps us understand the changes to family law in BC under the Family Law Act.

Specifically in relation to property division after divorce in BC, the White Paper states that the Family Relations Act was too flexible and outcomes were difficult to predict. One of the main purposes of the FLA was to provide more certainty for people in determining what property is subject to division.

Under the FRA, it would come down to whether property was”ordinarily used for a family purpose”. If it was, the property was divided. One way in which the FLA was meant to simplify matters is that instead of the “ordinarily used for a family purpose” test, the FLA presumes that all property is family property and is divided (with exceptions) unless it is excluded property.

At first glance, this seems simple enough: Everything that is owned by either spouse is divisible unless it falls into the category of excluded property. But alas, things are not always as they seem.

Excluded property is defined by section 85 as follows:

Excluded property

85 (1) The following is excluded from family property:

(a) property acquired by a spouse before the relationship between the spouses began;

(b) gifts or inheritances to a spouse;

(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) property held in a discretionary trust

(i) to which the spouse did not contribute,

(ii) of which the spouse is a beneficiary, and

(iii) 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.

The first wrinkle is that under section 85(2), anyone who claims property is excluded property has the onus of showing that property is excluded. The second wrinkle is that under section 85(1)(g), property derived from property or the disposition of excluded property is excluded property. The third wrinkle is that under 84(2)(g), family property includes the amount by which the value of excluded property has increased since the later of the date (i) the relationship between the spouses began, or (ii) the excluded property was acquired.

The effect is that any spouse who wants to claim property is excluded property must:

1. be able to trace that property from the beginning of the relationship or the date it was received by the spouse through to the separation date; and
2. have documentary relating to tracing the property including the value of the property at the beginning of the relationship or at the date it was received, at the time it was used to purchase or obtain other property, and at the date of separation.

As a result, those who keep reliable records of their assets, or those whose assets never change forms during a relationship will be at an advantage.