In Alberta, the Matrimonial Property Act has been amended and renamed the Family Property Act. The primary purpose of the amendments is to include property acquired by spouses in a non-married relationship (adult interdependent partners) as subject to the (rebuttable) presumption of equal division upon termination of the relationship.
What Property is Subject to Division Under Alberta’s Family Property Act
Under Alberta’s Family Property Act, most property acquired by spouses or adult interdependent partners during the relationship is presumptively subject to division when the relationship ends. This generally includes assets such as the family home and other real estate, bank accounts, pensions and retirement savings, investments, vehicles, and other personal property accumulated during the relationship. While certain property may be exempt, as outlined below, the starting point for most separations is that relationship property is shared and must be identified, valued, and addressed as part of the property division process.
Categories of Exempt Property in Alberta
When it comes to dividing property, Alberta’s Family Property Act has maintained four categories of exempt property, which are not divisible upon separation or divorce. They are:
- property owned by one of the spouses prior to the relationship;
- gifts from third parties;
- proceeds of settlement or judgment arising from a tort claim, and
- proceeds of a life insurance policy.
Exemptions Under the Family Property Act in Alberta
It is important to keep several things in mind when it comes to property division. First, any growth in the exempt property is considered to be divisible family property. Second, these exemptions from family property can be diminished or lost over time if not kept in a form that is identifiable or traceable to the exempt property. Third, adding a spouse to title of an exempt asset will effectively reduce the exemption. Finally, the onus of proving the exemption falls on the party claiming the exemption.
This becomes a problem, particularly for married spouses or those in long-term relationships, where an exempt asset has been mixed with a non-exempt asset. For example, if a residence owned prior to the relationship is sold and the equity put into a new jointly owned residence, perhaps multiple times over the course of a relationship, it becomes increasingly difficult to trace the exemption. Likewise, inheritances, settlements from tort claims and life insurance proceeds are frequently used either in full or in part to pay down mortgages and lines of credit, and buy vehicles and furniture, or pay for vacations. As a result, the exemption becomes increasingly difficult to trace and is often lost entirely. Third-party gifts are rarely documented as gifts to only one party at the time of receipt. For example, funds received from the parents of one of the parties as a down payment on a house are often documented as a gift to both parties in a “gift letter” for the purpose of mortgage qualification, thus making it exponentially more difficult to prove the exemption.
The best solution is to enter a cohabitation, pre-marital or post-marital agreement as contemplated by sections 37 and 38 of the Family Property Act, that details what property will or will not be divided upon separation or divorce, including pre-relationship property and the growth in the value of that property, as well as property acquired by either spouse during the relationship.
How Kirk Montoute Dawson LLP Can Help You Navigate Exemptions From Division of Family Property
Knowing which property is exempt under Alberta’s Family Property Act can be complex, especially when assets have been mixed or grown over time. The family lawyers at Kirk Montoute Dawson LLP can help you identify exempt property, understand your rights regarding the division of property, and develop strategies to protect your interests. With clear guidance and practical solutions, we ensure you can approach separation or divorce with confidence and secure outcomes that safeguard your financial future.
Author: Gary Kirk