Property Now, Property Later

By Michelle Guy, Vancouver Family Law Lawyer at Paine Edmonds LLP

At the time of the writing of this post, the division of property upon the breakdown of a marriage is handled very differently under the Family Relations Act than the division of property upon the breakdown of a common law relationship. Married couples have a presumptive right to half of the “family assets”, unless the other party can demonstrate that it would be unfair to not reapportion the division of property in their favor.

Sometimes, there is property that is not automatically subject to division. Current legislation applies a “family purpose test” that allows property to be excluded if it was not used for a family purpose. An example of this would be property that one party owned prior to the marriage that is not used or invested in by the parties during the relationship.

Common law couples, on the other hand, take away only what is registered in their names. If they wish to make a claim on an asset that is registered in the other party’s name, they must make an application seeking a finding of constructive or resulting trust. Put plainly, they have to show that they made a contribution to the property to the other party’s benefit and their own detriment that justifies them having a claim against that property. Arguments seeking a declaration of trust can be very complex and can result in expensive litigation.

The new Family Law Act, that comes into force on March 18, 2013, changes this up. Under the Family Law Act, common law couples and married couples are subject to the same rules regarding division of property. There is no longer a “family purpose test”, and all property brought into the relationship can be taken out by the original party owning that property. However, any growth in the equity or value of the property is subject to an equal division, regardless of whether it was used for a family purpose or not. Any inheritances received during the relationship can be taken out by the inheriting party, subject to division of any growth.

Due to the radical change in the rules surrounding the division of property, there will be a period of growing pains, where the new legislation is tested in the courts and the true effect on separating couples will be refined and clarified. It is anticipated that argument that was once focused on the “family purpose test” and trust arguments will now be replaced with arguments around the exact dates of the start and end of the relationship, and values of assets at both of these points in time.