The Family Relations Act is the principle piece of legislation governing the division of spouses' assets on the breakdown of their relationship. Part 5 of the act deals with the division of property and Part 6 deals with the division of pensions.

Note that the term "property," as it is used in the act doesn't only refer to real estate; in addition to real property, the term includes all other assets and personal property that a couple might own, such as jewelery, furniture, stocks, bank accounts, art collections and cars.

Only property that falls within the Family Relations Act's definition of "family asset" is subject to division between spouses. The act divides property into for three categories: family assets, business assets, and "other" assets. Before a court make an order for the division of property, it must make a decision as to which items of the spouses' property fall within each category. Of course, this is not to say that a court must find that certain assets are business assets or "other" assets; the whole of the spouses' property may fall within the definition of family asset.

Section 58(2) Family Relations Act defines the term "family asset:"

The key presumption of the Family Relations Act is that each spouse ought to share equally in all family assets when their marriage breaks down. That presumption is set out in s. 56 of the act. It is possible, however, for assets to be divided unequally, under s. 65 of the act, if an equal division would be unfair. That section reads, in part, as follows:

What this all boils down to is these general rules:

• In most cases, the majority of each spouse's assets will be found to be family assets subject to division.
• In a marriage of six or seven years or less, each spouse is likely to retain the majority of the value of the property that they brought into the marriage.
• In marriages longer than seven or eight years, the family assets are likely to be divided equally, unless one spouse requires a greater share of the assets in order to become independent.
• The longer a couple have been separated before an action for the division of assets is brought, the more likely each spouse will be to keep the majority of the family assets they bought following separation.
• Inheritances, gifts and lottery winnings are generally considered to be personal assets that won't be divided, however if those assets are used for a family purpose, the more time which passes the more they will become divisible family assets.

These general rules and the presumptions set out in the Family Relations Act depend entirely on a particular asset qualifying as a "family asset." How those assets wind up being divided depends on the financial circumstances and history of each couple.

The remainder of this chapter will discuss the nature of family assets in detail, how different sorts of assets are characterized as family assets under the act, and explore the two categories of non-family assets.

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Section 58 of the Family Relations Act provides the definition of "family asset" for the purposes of the act:

All of a couple's assets are presumed to be family assets from the get go; if a spouse disagrees with the characterization of some or all of the assets as family assets, it is up to that spouse to prove that they are not family assets to rebut that presumption.

A spouse who disagrees with the charaterization of an asset as a family asset must show that the asset was not "ordinarily used for a family purpose." Section 60 of the Family Relations Act provides:

Two elements of this section and s. 56 deserve to be explored in more detail...

"Ordinary Use"

The courts will more often than not take a fairly broad view of the meaning of "ordinary use." This phrase usually means normal use in the course of normal life, rather than the odd occasional or casual use. The incidental or rare use of an asset will not necessarily make that asset a family asset.

The courts have considered the meaning of "ordinary use" as follows:

1. the intention to use an asset for a family purpose may bring an asset within the definition;
2. the use of an asset before marriage does not mean that the asset necessarily falls within the definition;
3. empty land which is intended to be developed for a family home, or for other family purposes, may be a family asset; and,
4. financial assets intended to be used in retirement may be a family asset, even though they were never used during the marriage for the benefit of the family.

"Family Purpose"

Unlike "ordinary use," the courts will not necessarily take a broad view of the phrase "family purpose" and there is no clear trend in the case law on this point. Suffice it to say that unless an asset expressly falls within the two excluded categories of asset, business assets and "other" assets, the odds are very good that the asset in question was used for "a family purpose."

A narrow interpretation of the phrase "family purpose" would be "a use connected with the family as a whole," not just with one member of the family. This would restrict the scope of the assets which fall into the category of family assets.

A broad interpretation would include assets owned and used by only one member of the family. For example, assets owned by one spouse but intended to be used to provide for the family in the future have been held to be used for a family purpose. This would expand the scope of the assets which fall into the category of family assets.

Property Owned by Corporations: s. 58(3)(a)

If a company owns property that would otherwise be considered a family asset, like a cottage owned by a company which is controlled by a spouse, the shares in that company may become a family asset. Note that the individual piece of property itself, in this case the cottage, does not necessarily become a family asset, only the spouse's shares in the corporation. In such a case the shares would be split between the spouses, and the company would continue to own the asset.

Transfered Property: s. 58(3)(b)

When a spouse has transfered property to a third party, or to a trust which that spouse controls, that property may still qualify as a family asset. Moving the asset, or changing the nature of its ownership does not necessarily disqualify it from division.

If an asset is irretrievably transfered to a third pary, for example by the unilateral sale of the family car to some unrelated buyer, the spouse who sold the asset may be liable to pay the other spouse one-half of the asset's value in compensation.

In some cases the transfer of the property can be set aside, especially if the transfer was done to defeat the other spouse's claim to that asset. In a case like that, the transfer might qualify as a "fraudulent conveyance" within the meaning of the provincial Fraudulent Conveyance Act.

Savings Accounts: s. 58(3)(c)

Money held in savings accounts is considered to be a family asset when that money is used or intended to be used for a family purpose. Depending on the circumstances, this may include other savings vehicles, like GICs, or money placed during the marriage into a secret account.

Where a savings account is a joint account or a joint term deposit, the fact that the account is in both spouses' names is normally sufficient to characterize the account as a family asset, even if the account is only used by one of them.

Pensions and RRSPs: s. 58(3)(d)

Annuities, pensions and retirement savings plans are considered to be family assets under the act by definition. Pensions are divided under the rules set out in Part 6 of the Family Relations Act, other retirement savings vehicles are dealt with under Part 5.

Business Ventures: s. 58(3)(e)

When a spouse has contributed towards a business venture, either directly or indirectly, the spouse's interest in that venture may be a family asset. The spouse's contribution need not be in money, it can also consist of time, labour or anything else which gives rise to his or her interest in the venture.

The key here is whether the asset in question constitutes a "venture" within the meaning of this section of the act. This section has been held to encompass, among other things, the following:

1. businesses;
2. stock holdings, including options to purchase stock;
3. medical and dental practices;
4. purchases of property, where the property is bought on the assumption it will increase in value;
5. investments in franchises; and,
6. lottery winnings, despite the normal rule that lottery winnings aren't considered to be family assets.

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Assets that qualify as "business assets" are not family assets subject to division under the Family Relations Act. Section 59(1) of the act sets out the definition of "business asset:"

If an asset is found to be a business asset, it cannot be divided between the spouses. To qualify as a business asset, the asset must be ordinarily used for business purposes and the spouse who does not own the asset cannot have contributed towards either its purchase or operation. Business assets typically include the following:

1. companies;
2. shareholdings in companies;
3. company-related assets, like patent and trademark rights or accounts receivable; and,
4. property owned by companies that the spouse holds shares in.

Of course, if the non-owning spouse has contributed to the business asset, either directly (through money or labour) or indirectly (through the support of the owning spouse), the business asset may become a family asset.

The court has found business assets to be family assets in the following situations, among others:

1. where a spouse has contributed paid or unpaid work to a business;
2. where family assets have been used to buy or operate the business;
3. where family assets were contributed to the business;
4. where the non-owning spouse has contributed to the business by guaranteeing or co-signing a business loan; and,
5. where the non-owning spouse has allowed family assets to be used as collateral for a loan obtained by the business.

Note that minor or infrequent contributions by a non-owning spouse are not likely to make a business asset a shareable family asset, nor is this likely to be the case where a non-owning spouse's "role" in the company is fictitious and for income tax purposes alone, such as for income-splitting.

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If an asset is neither a family asset within the definition of s. 58 of the Family Relations Act, nor a business asset within the definition set out in s. 59, it is categorized as an "other" asset, and, ususally, remains the property of the owning spouse.

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Whether an asset falls within the scope of s. 58 of the Family Relations Act and thus qualifies as a shareable "family asset" depends on whether it was ordinarily used or intended to be used as a family purpose. In general, the characterization of a particular asset as a family asset will rest on the circumstances of each case.

This segment will review the kinds of assets that are most frequently disputed as qualifying or not qualifying as family assets.

Gifts and Inheritances

Gifts and inheritances are usually given to a specific spouse for his or her own personal use. In general, they are not family assets subject to division between the parties.

There are, however, some cases which indicate that where the gift or inheritance was used for a family purpose, like paying down a mortgage or family debt, the asset may be classified as a family asset. In general, the longer an inheritance or gift was used for a family purpose, the more of the asset will be considered to be a family asset.

Severance Pay

Severance pay received following a dismissal from employment has recently been found not to be a family asset. Instead of being an asset, the court found to be income. While severance pay will not be counted as an asset to be divided, it may come into consideration in deciding what a person should pay as child or spousal support.

Dowry Assets

Where dowry is a gift given in expectation of marriage, dowry assets are usually treated as a personal gift and are not shareable, especially where the dowry is received before marriage as a payment for the marriage.

Where the dowry consists of assets brought by a spouse into the marriage, if the assets were intended to be used for the benefit of the family or are used for the benefit of the family, they will be treated as shareable family assets.

Canadian law does not require the payment of dowry in return for marriage or the expectation of marriage, and the court will not enforce an agreement that requires dowry to be paid.

Pensions

Pensions are shareable family assets by definition. The period of the pension which is normally shareable is the period from the date of the marriage until the triggering event; contributions made before marriage and after the triggering event, and the interest accruing on those periods of contribution are, in general, not shareable.

Note that it is possible for the court to make an order requiring the sharing of the pension from before the date of marriage, or to reapportion the portion of the pension which is shared. As the BC Court of Appeal said in Toth v. Toth, it is up to the spouse seeking reapportioment to prove that it would be unfair to share the pension equally before the pension will be divided in anything other than an equal manner.

Canada Pension Plan Benefits

CPP credits are automatically equalized between spouses on their divorce. British Columbia is one of only a few provinces which allow a couple to choose not to divide their CPP credits. Note that the CPP people in Ottawa must be notified of the parties' intention not to divide their CPP credits or they will divide them automatically.

CPP credits can also be equalized between people in a common-law relationship, however the person seeking to equalize the credits must apply within a certain period of time following the end of the relationship.

Court Awards

Court awards for damages for personal injury or another civil wrong are considered personal to the spouse who receives them and are, in general, not family assets.

Where an award contains an allotment for lost wages, that portion of the award may be taken into account for the purposes of child or spousal support, but not the portion awarded for injury, pain and suffering, and so forth.

Artworks

Art located in the family home is a shareable family asset where the art is used for the enjoyment of the family and decoration of the home. If an artwork is bought for a business and displayed at the business, it will likely be characterized as a business asset and will not be shareable.

Jewellery

In general, jewellery is personal in nature and will not be characterized as a family asset. This includes gifts of jewellery made by one spouse to the other. Jewellery which is given to the family as an asset or a form of savings, as is common in some cultures, will be treated as a shareable family asset.

While this is not applicable to married spouses, an old rule of the common law says that the person who breaks off an engagement is not entitled to the return of the ring.

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