By: Kathleen Wells, Wells Family Law
When spouses are getting a divorce, dividing up their property can be stressful and confusing. It’s a common misconception that all of the couple’s property, no matter what that property is or where it came from, must be divided between them in equal shares. In fact, there are some situations in which a spouse’s property belongs solely to them and does not have to be shared with the other spouse upon divorce, and other situations in which the division is less than 50/50.
Exempt Property and Tracing
The Alberta Matrimonial Property Act [i] authorizes the court to divide all property owned by the separating spouses. The default position in the Act is that everything gets divided equally [ii]. However, there are a number of property items that are considered exempt from the presumption of equal division:
- Property that was a gift from a third party to only one of the spouses;
- Property a spouse acquired through an inheritance;
- Property a spouse had acquired before the marriage;
- An award or settlement for damages in favour of only one spouse; and
- The proceeds of an insurance policy that is not in respect to property. [iii]
If the matrimonial property falls into one of these categories, the value of the property at the time of the marriage, or the value of the property on the date that it was received by the spouse (whichever is later), is exempt from being shared equally with the other spouse.
In order for a spouse to claim that the property fits into one of these categories and should not have to be divided equally with the other spouse, they must prove to the court that the property can be traced. Tracing must be done to show the court that the property over which the exemption is being claimed has not been “commingled” with other matrimonial property that is required to be equally shared. Whether or not the property has been commingled with other joint matrimonial property is key to the courts: once the property is turned into joint property, the spouse will lose the full value of their exemption. [iv]
For example, if the Wife received an inheritance from her mother of $100,000 that was gifted to only her, and she put that money into a bank account that was in her name alone, if the money in the bank account was never touched by the Wife or used by the spouses together in any way (for example, to improve the family home), the Wife would be able to trace that gift from the inheritance to the bank account to show the court that she was entitled to an exemption for the full $100,000, and therefore should not have to share the money with the Husband. However, if the Wife occasionally dipped into the bank account to take the family on vacation, for example, the money would be considered as being used for family purposes and commingled with joint matrimonial funds. The Wife would risk losing the full value of the $100,000 exemption.
How property is traced, and whether or not tracing will be successful, will depend on the facts of each circumstance. The court permits tracing exempt property into after acquired property (for example, referring to above illustration, if the Wife used the $100,000 inheritance to buy an RRSP that was just in her name). No matter how the tracing is carried out, there must be some evidence to link the exempt property to the newly acquired property. [v]
It’s the responsibility of the spouse who is claiming that the property is exempt from equal division to prove to the court that they merit an exception, and the property does not need to be shared.
Unequal Division
A spouse can also attempt to convince the court that the property shouldn’t be divided equally, based on the Section 8 of the Matrimonial Property Act list of factors the court will consider prior to a property division. These include:
- The contribution made by a spouse to the marriage and welfare of the family (including homemaking and parenting contributions);
- The contribution (financial or in some other form) made by a spouse either directly or indirectly to the improvement or management of a family business or farm;
- The contribution (financial or in some other form) made by a spouse either directly or indirectly to the acquisition, conservation, or improvement of property;
- The income, earning capacity, liabilities, obligations, property, and other financial resources that each spouse had both at the time of the marriage and at the time of the trial;
- The length of the marriage;
- Whether or not the property was acquired while the spouses were separated;
- The terms of any separation agreement;
- Whether or not the spouse has gifted or transferred any property to third parties;
- Previous property distributions made between the spouses by way of gift or agreement;
- Earlier court orders;
- Tax liabilities that may arise by a spouse transferring property;
- Whether or not the spouse has given away property to the detriment of the other spouse; and
- Any other facts or circumstances that the court considers relevant. [vi]
Of course, the court will have the final say in how property is going to be divided, and it is important to keep in mind that the default position is that all property will be shared equally between the divorcing spouses.
If you have questions about divorce and property division, please CONTACT Wells Family Law, Calgary divorce lawyers committed to fast effective resolution, for a free consultation.
[i] Alberta Matrimonial Property Act, R.S.A. 2000, c. M-8.
[ii] Ibid. at s. 7(4).
[iii] Ibid. at s. 7(2).
[iv] Scheffelmeier v. Krassman, 2011 ABCA 64, 505 AR 83.
[v] Ibid. at para. 14.
[vi] See Matrimonial Property Act, ibid., s. 8.