July 22nd, 2016

On April 28, 2016, the B.C. Court of Appeal made a significant higher court decision under the Family Law Act (FLA) dealing with Excluded Property in B.C.   The results underline the importance of careful and thorough legal documentation in the area of property under family law.

In general, under the FLA, all property owned by either or both spouses at the date of separation is “Family Property” to be divided between the spouses, unless it is “Excluded Property”.  Family Property includes assets such as real property, bank accounts, pensions, businesses, and property in which there is a beneficial interest.  Family Property is presumed to be shared equally between the spouses, but, under certain circumstances, a Court may order unequal division of Family Property.

Excluded Property is any property that is excluded from the communal pot of Family Property to be shared and is presumed to remain the property of the spouse who acquired it.  Examples include assets held by a spouse before the couple married or began living together, and certain kinds of property acquired during the spouses’ relationship such as gifts, inheritances, insurance, or certain portions of court awards.  Generally, property purchased or obtained using Excluded Property remains excluded if it can be “traced” to the Excluded Property. Any increase in value of Excluded Property realized during the term of the Relationship is Family Property to be shared equally.

The recent B.C.C.A. case of V.J.F. v. S.K.W., threatens the notion of Excluded Property remaining the Property of the person who acquired it, even if it can be traced to a new form of property.  In V.J.F.v. S.K.W., the couple was married for almost 10 years.  During the marriage, the husband’s former employer gifted him a $2-million inheritance which the husband then used to buy a home in which the family lived.  He placed the property in the sole name of the wife for creditor protection to protect him from future possible claims against himself.  Upon the breakdown of their marriage, the main dispute was whether or not the property derived from the $2 million was Family Property to be shared or Excluded Property to stay with the husband.

At trial, the court ruled that the $2 million asset was no longer Excluded Property, but was considered to be Family Property to be divided evenly between the parties.  The husband appealed the decision and lost.

CFMR family lawyer, Melinda Voros, outlines the BC Court of Appeal’s findings and her own conclusions in her detailed  Case Comment on V.J.F. v. S.K.W., 2016 B.C.C.A. 186, April 28, 2016

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