When equal isn’t equitable: Dividing family property in divorce

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A 50-50 split is not always the fairest way to divide family property, but separating spouses will face an uphill battle to convince a judge to award them an unequal share.

Under B.C.’s Family Law Act (FLA), the starting point for dividing family property is that each spouse is entitled to half unless the parties have an agreement stating otherwise. The same goes for the couple’s debts, although neither will be as keen to get their hands on those. The law only allows judges to consider sharing the family property unequally if an equal division would be “significantly unfair.”

When it comes to the division of property, the FLA does not distinguish between married or common-law spouses, so couples living together in a “marriage-like” relationship for more than two years may also be subject to the same rules.

Property division basics

Before getting into an unequal division of family property, let’s look at what goes into the calculation for an equal split.

In general, the FLA classifies family property as anything that the couple owned separately or jointly on their date of separation, regardless of whose name it is in. Depending on the situation, that might include property such as the family home, bank accounts, insurance policies, pensions and investments, or shares in a business.

Importantly, the law recognizes another category of “excluded property” that is not included in the family property. This includes assets that one spouse owned before the relationship started, gifts and inheritances made exclusively to one spouse during the relationship, as well as certain kinds of insurance payouts or trust property.

For the purposes of property division, when excluded property has appreciated over the course of the relationship, only the increase in value may be shared between the parties on separation.

Full disclosure

Both spouses must provide full and frank financial disclosure to each other to ensure that both the family property and excluded property are properly identified and valued.

In many cases, identifying the property at issue is a relatively straightforward task, but it can become more challenging for couples with higher net worth or more complex sets of assets.

While it may be tempting to hide the complete picture of your finances from your ex after an emotional breakup, playing fast and loose with your disclosure is never a good idea.

Apart from the inherent unfairness, it is also generally pointless since hidden funds can almost always be uncovered, and any judge looking at the case is unlikely to react well to any signs of deception.

High threshold for unequal division

Section 95 of the FLA provides the court with jurisdiction to “order an unequal division of family property or family debt, or both, if it would be significantly unfair” to divide them equally.

The test is a tough one for parties to meet. Judges may consider several factors, including the length of the relationship, a spouse’s contribution to the career or career potential of the other spouse, bad faith behaviour leading to a reduction in property value, as well as any tax liabilities attached to particular sales or transfers of assets.

In addition, judges are allowed to consider the post-separation conduct of a spouse if it caused a significant decrease or increase in the value of family property or family debt “beyond market trends.”

**This post is not intended to be legal advice and should not be taken as such. Please contact McConnan Bion O’Connor & Peterson if you have any questions regarding this post or require assistance or legal advice regarding property division.