The Family Law Act plays a crucial role in governing property division in cases of separation or divorce. It ensures fairness and clarity in determining how assets and liabilities are divided between the parties. Sections 85 and 96 of the Act specifically address the concept of excluded property, which refers to certain assets or debts that are exempt from division. In recent years, there have been notable changes to these sections, impacting how excluded property is treated. This blog post will explore the changes and their implications.
On March 27, 2023, new amendments to the British Columbia Family Law Act were proposed to provide clarity on issues arising when spouses separate.
The law on excluded family property has been a hot topic in recent years. A vast majority of case law has established that a spouse looses their exclusion when they transfer title to the other spouse; it is then seen as a ‘gift’. In comparison certain case law has established that the exclusion is maintained. These varying outcomes have led to amendments to the Family Law Act respecting excluded property.
Section 85 is amended by adding the following subsection:
(3) If property is excluded from family property under subsection (1), the exclusion applies despite any transfer of legal or beneficial ownership of the property from a spouse to the other spouse.
Under the proposed changes, what usually would have been determined as a loss of exclusion of the contributing spouse will now be treated as excluded property of the contributing spouse.
Section 85 of the Family Law Act establishes the framework for determining excluded property. It specifies that certain assets or debts are not subject to division between spouses or partners upon separation or divorce. Previously, the Act outlined a limited list of excluded property, including gifts, inheritances, and specific personal injury awards.
However, recent changes to Section 85 have expanded the scope of excluded property. The amendments aim to provide greater clarity and address concerns regarding the unfair division of certain assets. The revised section now encompasses assets acquired before the relationship or marriage, property acquired after separation, and assets expressly excluded by a valid agreement or court order.
These changes recognize the importance of preserving individual ownership rights and protecting assets that were acquired independently of the relationship. By broadening the definition of excluded property, the amendments strive to ensure a fair and equitable division of assets during the dissolution of a relationship.
Section 96: Reimbursement for Excluded Property
Section 96 of the Family Law Act governs the concept of reimbursement for excluded property. It allows a spouse or partner to claim compensation for the contribution they made towards the acquisition, maintenance, or improvement of excluded property during the relationship.
In recent years, changes to Section 96 have provided greater clarity on the circumstances in which reimbursement claims can be made. The amendments emphasize that reimbursement is only applicable if there is a direct or indirect contribution by a spouse or partner to the excluded property.
The revised section also establishes that reimbursement claims cannot be made if there was a valid agreement or court order that specifically addressed the issue of excluded property and provided for a different outcome.
The changes to Section 96 aim to strike a balance between recognizing the contributions made by a spouse or partner and respecting the principle of excluded property. They provide a clearer framework for determining when reimbursement is warranted and help prevent disputes regarding the division of excluded property.
Implications and Benefits
The changes to Sections 85 and 96 of the Family Law Act have several implications and benefits:
1. Clarity and Fairness: The amendments bring greater clarity to the treatment of excluded property, ensuring that individuals’ rights to certain assets are protected. They promote fairness by considering the source and nature of assets when determining their division.
2. Preservation of Individual Assets: The expanded definition of excluded property recognizes the importance of preserving assets acquired before the relationship or through separate means. This protects individuals’ financial security and promotes autonomy.
3. Reduced Disputes: By providing clearer guidelines for reimbursement claims, the amendments help reduce disputes and litigation related to the division of excluded property. This contributes to a more efficient and streamlined separation or divorce process.
4. Customizable Agreements: The changes enable individuals to enter into valid agreements that address the treatment of excluded property according to their specific circumstances. This allows for greater customization and flexibility in property division.
If you would like to discuss how these changes may affect you, please contact our Family Law Team and they will be happy to help you.