The Family Property Act
The Family Property Act determines what is considered family property and what is not family property. It provides ways to protect family property if one spouse is wasting it or selling it to avoid it being divided. It also sets out rules to determine the value of different assets that are family property and when a spouse can make a court application to have family property divided.
What is Family Property
Under the Act, as a general rule, family property includes any real or personal property owned by one or both spouses, or by one or both spouses and a third person. It also includes any property that one or both spouses have an interest or benefit in. Real property includes land and anything attached to the land, such as buildings. Personal property includes moveable objects like household goods, jewellery and cars. Family property also includes such things as business interests, pensions and bank accounts.
What is Not Family Property - Exemptions
The value of property acquired before the spousal relationship began – other than the family home and household goods – is generally exempt from distribution. This means that the value of that property at the time the spousal relationship began would not be divided under the Act. The spouse who owned the property would receive the property or the amount that it was worth at the start of the spousal relationship. Any increase in the value of the property since that time could, however, be divided under the Act.
This exemption applies to property that was owned by one spouse before the relationship began as well as property that was received as a gift or inheritance before the spousal relationship began, unless the gift or inheritance was intended for both parties.
Some other family property is also exempt from distribution, including:
- civil court case settlements
- insurance payments for something other than a property claim
A court could reject a claim that certain property is exempt if the court is satisfied that the exemption would be unfair. In addition to the considerations discussed above, the court will also consider…
- contributions of any kind by one spouse to the other spouse, their children or property
- contributions of any kind used to acquire, maintain, improve or use exempt property
- the value of other property that is available for distribution
- any other relevant facts or circumstances
Protecting Family Property
A court can make an order preventing a spouse from selling, giving away or leaving with property if they are satisfied that the spouse is wasting family property and jeopardizing the family’s financial security or attempting to avoid a division of it under the Act.
Valuing Family Property
The value that is used to divide family property is the market value, meaning what the asset would sell for. It is not the replacement cost of the asset. If the asset is not new the price will likely be less than the cost to buy a new one. The exact amount that an asset will sell for can never really be determined unless it is sold. Spouses may choose to begin with their own best estimate of what an asset is worth. Other people such as real estate agents, for real property such as houses, and dealers, for things like vehicles, may help people to determine the market value of an asset. Looking at what similar used items sell for online or through other means can also be helpful.
Property may be physically divided, leaving each spouse with possession of a variety of items making up their share of family property. Because many assets, such as a car, cannot be cut in half, one spouse may get the whole of that particular item and the other spouse may get something else of equivalent value.
Dealing with Debts
Although debts are not family property they will be taken into account when family property is divided. The total amount of all debts may be subtracted from the total value of all family property and the remaining value divided. Alternatively, one spouse may be ordered to or agree to take responsibility for certain debts. For example, if one spouse is going to be awarded the asset they may also take responsibility for any debt, such as a mortgage or loan, associated with the asset.
It is important to remember that lenders are not bound by an agreement or a court order regarding a debt. While the spouses may agree or the court may order that a spouse is responsible for a debt, a lender is not required to remove the other spouse from the loan agreement. If both spouses signed the loan or the agreement, as far as the lender is concerned, they are both still responsible for the debt. While a lender could agree to remove one spouse’s name, they may be unwilling to give up the security of having both spouses be responsible for the debt.
If your spouse is supposed to have responsibility for a debt, by agreement or court order, but the lender will not remove your name, your spouse will usually also agree to or be ordered to indemnify you. This means that if you need to pay the lender your spouse would need to reimburse you for this cost.
Either spouse can ask the court for a division of their family property. An application can be made at any time during the spousal relationship or immediately after the death of a spouse. Married spouses must make the application before they are divorced. Unmarried spouses must make the application within 24 months following their separation.