Dividing Family Property And Family Debt When A Relationship Ends

The new legislation governing family law in British Columbia, the Family Law Act (FLA), defines family property as all property owned by one or both spouses at the date of separation unless the asset is “excluded” (for example pre-relationship property, inheritances and gifts). 

Whether or not an asset is used for a family purpose is not relevant when determining if something is family property.

Family property includes the following:

  • The family home
  • RRSPs
  • Investments
  • Bank accounts
  • Insurance policies
  • Pensions
  • An interest in a business
  • The increase in value of any property owned by one spouse prior to the beginning of the relationship (this applies to all “excluded property”)

Family debt is all the debt that either spouse took on during the relationship. Family debt includes the following:

  • Mortgages
  • Loans from family members
  • Bank lines of credit or overdrafts
  • Credit cards
  • Income tax
  • Debt taken on post separation if money was spent in relation to family property

It does not matter in whose name the debt is. The same applies for family property. However, creditors may only demand payment from the spouse who incurred the debt. 

When you separate, it is advisable to let all your creditors know in writing that you and your spouse are no longer together. 

It is also important to remember to change the beneficiary of your investments, RRSP’s, insurance and will, if your spouse was a beneficiary. 

Upon separation, the division of assets and of debt applies to married couples as well as unmarried couples who have lived in a marriage-like relationship for at least two years (common-law spouses). 

Unless a couple has a written and signed agreement stating otherwise, when a couple separates the law dictates that all family property and debt are to be divided 50/50 between spouses. 

For “excluded” assets, only the increase in the value of the asset during the relationship is divisible. 

The court will, however, order an unequal division of property if it would be “significantly unfair” to divide it equally. 

The onus is on the spouse wanting an unequal division of family property to prove their circumstances meet this relatively high threshold. When making this decision, the court looks at several factors including but not limited to the following:

  • The duration of the relationship
  • Any written or unwritten agreements between spouses
  • How much each spouse contributed to the other’s (potential) career
  • Each spouse’s ability to pay a share of the family debt (if debt is more than value of family property)
  • If one spouse did something to raise/lower the family debt or property after separation.
  • A spouse’s intentional or reckless depletion of the family property
  • The circumstances surrounding how the family got into debt

It is important to note that if you were married, you must apply for a division of family property/debt within two years of the date you received your order for divorce or annulment. 

If you were unmarried, you must apply within two years of your separation date. 

Dealing with family property and family debt can get complicated. It's advisable to speak with a lawyer to ensure you have all your bases covered. Call our office if you have questions about your situation.