How does DIVISION OF FAMILY PROPERTY and debts work in Alberta?
There’s more involved in a marital separation or divorce than people parting ways. What happens to the property and debts that were shared between the couple? Who gets what?
The Family Property Act (FPA) is the Alberta law that classifies and divides family (formerly referred to as matrimonial) property and debts after a marriage breakdown.
This post will explain how the division of family property and debt works in Alberta.
What happens when spouses disagree on property division?
For some spouses or partners, it’s possible to come to an agreement on the division of property and simply have a lawyer draw up a contract to record the agreement. In this scenario, you’re each required to have independent legal counsel who will explain your rights and review the contract with you.
For spouses or partners who disagree on the division of property, you can file a legal claim for property distribution within 2 years of the date of separation. You and your spouse or partner must each submit a statement of all property you own (in whole or in part). This list should include 3 categories:
- Family property
- Exempt property
- Increase in value of exempt property
The Court determines the value of your property and will decide on the division of family property and debts.
Alberta law intends to divide everything equally and fairly (including debts), but sometimes an unequal division is more fair because of special circumstances.
Before you decide to take your family property division to Court, consider all possible outcomes. Even if you win a judgment, there is a chance you’ll end up with less (or even nothing) if significant assets must be sold to cover debts and legal costs.
What is a matrimonial asset in Alberta law?
The Family Property Act (FPA) defines property as all property that is owned by one or both spouses or partners. It’s property that was used for the benefit of one or both spouses or partners (or their children). The property was acquired by one or both spouses or partners during the marriage relationship or after the separation or divorce.
Items commonly included in family assets are:
- Home (could be a house, part of a house, condo, suite, or mobile home)
- Vehicles
- Investments, stocks, and bonds
- RRSPs and employment pensions
- Business assets
- Household goods
This is not a comprehensive list. There is complexity to family property, such as what the asset was used for, where the asset is, who owns it, and many other factors. A family law lawyer can help you determine which property qualifies for division under the FPA.
What property is exempt from division in an Alberta divorce?
Some property is exempt from division in an Alberta divorce or separation. These include:
- Property that was purchased by one spouse or partner prior to the marriage or interdependent relationship
- Inheritance
- Insurance proceeds
- Gifts received from a third party
- Awards or legal settlements designated for one spouse or partner
The Court will not classify property as exempt without evidence. Proof of exemption might include documents (such as those showing the property value on specific dates). However, in some cases, documentation may not exist. For situations like that, the Court may consider precise testimony evidence enough. But understandably, evidence is more difficult to provide without something concrete to show.
The value of the exempt property is based on the market value at the time it was acquired or when the marriage or interdependent relationship began. If the value of the exempt property increased during the marriage or interdependent relationship, the increase in value may be divided equitably (not necessarily equally) between the spouses or partners.
If there is a prenuptial or postnuptial agreement that protects certain assets from the division, the usual division according to the FPA is altered.
What factors do the courts consider in the division of matrimonial property?
So how does the Court decide what is a fair division of family property? And if unequal division is decided, what determines who gets what?
One factor that does not influence the division of property is misconduct of either spouse or partner. For example, an affair, domestic abuse, drug abuse, or other criminal behaviour does not impact the division of matrimonial property. The only exception is when a spouse or partner used or sold family property improperly.
Factors the Court considers in the division of family property include:
- The length of the marriage or interdependent relationship
- The contribution of each spouse or partner to the marriage or interdependent relationship (including parenting and homemaking duties)
- The financial situation of both spouses or partners
- Tax liabilities of transferring or selling property
- Any other agreements between the spouses or partners
- Any Court Orders against each spouse or partner
How are debts divided after marital breakdown in Alberta?
Most spouses or partners understand that receiving property acquired by secured debt (such as the home with a mortgage or the car with a loan) means they become responsible for that debt. However, even unsecured debt like credit cards or loans from a loved one need to be repaid. Someone must be responsible for those, too. This is why debt is included in the division of family property.
Typically, if the debt was incurred during the marriage or interdependent relationship, even if it was accumulated under the name of only one spouse or partner, the Court will divide it equally. This is especially true if the debt was for the benefit of the family, such as purchasing household goods, clothes, food, or vacations on a credit card.
However, if you can prove that the debt was incurred outside of your marriage or interdependent relationship, the Court may decide on unequal division of the debt.
Legal Help for the Division of Family Property & Debts
The division of family property and debts in Alberta is complex. Beyond the legal intricacies, this process can generate extreme tension and heighten conflict.
The family law lawyers at Osuji & Smith are family property division experts committed to minimizing stress and clearly communicating your rights and obligations after a divorce or separation. Contact us today for help with your division of family property and debts.
