Uncertainty Surrounding Unequal Division of Family Property

Property belonging to an individual before a relationship that continues to exist at the time of separation, is generally excluded property. However, there is recent uncertainty under the Family Law Act where the excluded property of one person has been gratuitously transferred to a spouse during the relationship. There is now doubt that this property will be characterized as excluded by the courts in the event of property division.

The decision in F. (V.J.) v. W. (S.K.), 2016 BCCA 186, involved a transfer of excluded property (money received from an estate) from one spouse to the sole name of the other for the purpose of creditor protection. This was found to be a gift from the husband to the wife because he derived no property from the disposition and intended to retain no beneficial interest. As a result, this $2 million he received from his employer’s estate was to be equally divided rather than excluded from the division of property. This case has had large repercussions for the division of property under the Family Law Act, and among them, it remains unsettled as to how a transfer of excluded property to property held as tenants in common will be treated.

This situation is not unusual as often money received from inheritances, or a previous home sale, is used towards the purchase of new property. At that time, decisions on property title (names, percentages) are often based on a balance of important considerations, including estate planning and taxation. As an example, the province of B.C.’s First Time Home Buyers’ Program offers those who qualify a scalable tax exemption based on the percentage of interest that the home buyer(s) have in the property. If two parties are to purchase together, and only one of the parties qualifies, it becomes more attractive to increase the percentage of title to the qualifying party for a greater tax exemption.

Placing property in the name of someone else jointly or exclusively is commonly done on the assumption that the benefit of the property will continue to be shared. In situations where the parties then separate, unequal title arrangements may have an effect on obtaining an equal division of property as assumed under the FLA, or a claim for excluded property.

If a transfer of inheritance is made to a new matrimonial home that is held as joint tenants, there is a risk that the courts may find it to be gifted to the spouse and not excluded property. This means that in the unfortunate event of separation, it would be categorized as family property, and presumed to be split equally. This risk should be balanced with any incentives that may exist in deviating from putting the title of a new property solely in one name, or two as joint tenants.

The preceding paragraphs were for information only and not to be construed as legal advice. If you have any questions about property division or excluded property, please contact our office to speak to one of the lawyers at CWH Law Corporation: Carol W. Hickman Q.C., Laurence Scott Q.C., Rupinder Shoker, Rizwana Choudhry or Emily Raven.

This entry was posted in Family Law. Bookmark the permalink.