On separation, each spouse is entitled to half of all family property. Under section 84 of the Family Law Act, family property includes all real property and personal property that one spouse owns or has a beneficial interest in on the date of separation. However, under section 85 of the Family Law Act, inheritances and property acquired by one spouse before the start of a relationship are excluded from family property. On the breakdown of a relationship any excluded property is not divided equally between spouses and instead it continues to belong solely to the spouse who inherited it or brought it into the relationship. However, what happens if previously excluded property is transferred into the other spouse’s name? Will a court consider the spouse to have gifted half the value of the excluded property to the other spouse or will the spouse still be entitled to the full value of the excluded property?
This question was considered in a previous blog post which discussed the case of Remmem v. Remmem, 2014 BCSC 1552. In Remmem v. Remmem the court held that when the husband transferred his excluded property into both spouses’ names he had not gifted half the value of his excluded property to his wife and he was therefore still entitled to the full value of the excluded property on separation.
There have been two recent Supreme Court of British Columbia decisions, both of which reached a different conclusion then the outcome in Remmem v. Remmem.
The first case is Wells v. Campbell, 2015 BCSC 3. In this case the husband owned a property before the start of the relationship which he transferred into joint tenancy during the marriage. The court found that when the husband transferred the property into joint tenancy, he did so as a gift to his spouse and both spouses therefore had an equal interest in the property. The court summarized saying, “… excluded property relates to property which was held by a spouse prior to the relationship and in which an interest in title was not transferred to the other during the relationship.”
The second case is V.J.F. v. S.K.W., 2015 BCSC 593. In this case the husband received an inheritance of $2 million during the marriage. He used the bulk of the inheritance to purchase property in his wife’s name to protect it from any future potential creditors. The court held that the $2 million inheritance was initially excluded property however, when the husband used the funds to purchase property in his wife’s name he had gifted it to his wife and the property became family property subject to equal division.
These cases show that if you enter into a relationship with excluded property there is a risk that it may be equally divided on separation or divorce. It is highly recommended that you speak to a family law lawyer for more information on how to protect your excluded property from being shared equally on the breakdown of a relationship.
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