Spouses can make an agreement to divide all or some of their family property in whatever way they think is best. Property that is dealt with under an agreement is exempt from distribution under The Family Property Act. However, there are certain requirements that must be met for an agreement to be recognized as valid under the law.
The Act states that an agreement must be in writing and must be signed by each spouse in front of a witness. Each spouse must also get independent advice from their own lawyer before signing the agreement. Each spouse must then acknowledge in writing, apart from the other spouse, that they have received independent legal advice and that they understand the agreement and its effect on their rights. When making an agreement it is critical that the parties understand how family property is dealt with under the Act so that they can decide what they want to change or clarify by agreement.
Once made, courts will not interfere with property dealt with under an agreement unless the agreement was grossly unfair and one-sided at the time it was made. Without a valid agreement, family property will be divided according to the Act. While agreements that do not comply with the requirements are not binding on the courts, they may still be considered and given whatever weight the court thinks reasonable.
To properly deal with some or all family property by agreement, full disclosure by both spouses is required. It is important for both spouses to have a complete picture of the family property and its value, including:
- all real property
- general household goods and vehicles
- bank accounts and savings
- pension and retirement savings plans
- life and disability insurance
- business interests
- accounts receivable
- other property
While debts are not considered family property under The Family Property Act, they nonetheless form part of the big picture and must be factored into a property agreement. The Property Statement that must be filed with court applications involving property can also act as a kind of worksheet for spouses who are considering making an agreement. Once spouses have a clear picture of all their debts and assets they can decide how to divide them.
Agreements should cover things such as…
- any assets that are in the name of only one spouse that will stay in the name of the spouse who currently has title
- any assets that are in the name of only one spouse that will be transferred to the other spouse
- any joint assets that will be transferred to the name of one spouse only
- how any transfers will be done, i.e. which spouse is responsible for the paper work, legal expenses and other costs, etc.
- how assets that are not in the name of either spouse e.g. furniture, art work, etc. will be divided
- any assets that will be sold, as well as the process for the sale and how the proceeds will be divided/used to pay debts
- any cash payments one spouse will make to the other spouse to equalize the value each will receive, as well as when and how these payments will be made
- any debts that will be paid out and how this will be done, i.e. who will be responsible for doing this, where the money will come from and when this will be done
- which spouse is responsible, as between the spouses, for which remaining debts and what will happen if the lender requires the other spouse to pay the debt, i.e. the spouse who covered the debt will be reimbursed
- spouses are both free to acquire property in the future without any claim from the other
- assets that are not disclosed at the time of the agreement are not covered by the agreement
This is not a complete list of things to include in an agreement. You will need to have a lawyer review your agreement.
Even if you can’t reach an agreement on the division of property you may be able to reach an agreement on the value of certain property with or without the assistance of professionals such as appraisers and accountants. This could simplify a court application for a division of property.