What Happens to Property Owned Before Marriage or Common-Law Partnership? Divorce & Separation Answers

Joe and Sally have been happily married for three years, but their relationship hit a rough patch after the sudden loss of Sally’s mother. Things changed, and Joe became less supportive, showing sides of himself that Sally had not seen before. Now, Sally is thinking about divorce. Before making any decisions, she wants to understand her rights. Sally is particularly worried about whether she has to give Joe any of the $50,000 inheritance from her late mother. She also wonders if she has any claim to their home, as Joe owned it before they were married.

The Family Property Act governs the division of property, generally splitting property 50-50 upon divorce, but with some property being exempt:

• Sally’s $50,000 inheritance from her mother is considered exempt and would be Sally’s to keep.

• The original value of Joe’s home is his, but any increase in its value during their marriage is split equitably, which is not always equal. For example, Sally could be entitled to only $50,000 of the home’s increased value of $150,000.

Keep in mind that exceptions to exempt property exist, and details vary according to each individual’s specific circumstances. Consulting with a Spectrum Family lawyer is crucial in understanding your rights and entitlements.

The Family Property Act

The Family Property Act (FPA), formerly known as the Matrimonial Property Act (MPA), has extended property division rights to those in common-law relationships, now recognized as adult interdependent partners. This means you do not have to be married to have rights to property division.

Who’s Considered an Adult Interdependent Partner?

You might be one if you:

• Lived together for at least three years in a committed relationship,
• Have a child together and a relationship of some permanence, or
• Signed an agreement that says you are adult interdependent partners

If you are married or in an adult interdependent partnership, the FPA establishes a presumption of equal division of property and debts upon divorce or separation. Still, certain types of property are exempt from this distribution. These include assets owned before the marriage or partnership, inherited assets, personal injury lawsuit proceeds, gifts from third parties, and insurance proceeds. However, it is essential to note that the increase in value of exempt property may still be subject to division.

If you believe you were or are in an adult interdependent relationship, reaching out to a Spectrum Family lawyer can help you clarify your rights and entitlements.

Exempt Property and Its Classification

Classifying exempt property under FPA involves determining its status and division in divorce and separation proceedings. When it comes to exempt property, specific rules and guidelines need to be followed.

Here are some key points regarding the classification of exempt property:

• Evidence is required to prove exempt property exists
• Exempt property’s market value at marriage/acquisition is exempt
• The increase in the value of exempt property may be divided
• Increases in the value of an exempt property are divided equitably, not necessarily equally

Evidence must be provided to establish the exempt status of a property. This can include ownership records, gift letters, or inheritance documents. The property’s market value at the time of marriage or acquisition is considered exempt and not subject to division. Also, any increase in value to the property during the marriage or adult interdependent relationship may be subject to division, with the court making the decision based on what they think would be an equitable distribution.

Proving the Existence of Exempt Property

To establish the existence of exempt property under the FPA, sufficient evidence must be provided. It is vital to gather and present documentation that clearly demonstrates the nature and origin of the property in question. This evidence should include purchase agreements, receipts, bank statements, and other relevant records that establish ownership before the marriage or relationship.

In addition to proving ownership, evidence of the property’s value may be necessary during marriage or acquisition. This can be achieved through appraisals, assessments, or other valuation methods that accurately determine the property’s market value.

Exceptions to Exempt Property

Exceptions to exempt property can occur when there are:

• Commingling of exempt assets
• Increase in value of exempt property
• Agreements

When an exempt property is “commingled” (or mixed) with matrimonial property in a way that makes it indistinguishable or part of the family’s assets, it may lose its exempt status.

For example, suppose Sally deposited her $50,000 inheritance money into a joint bank account owned by her and Joe. Then, funds from the bank account were used to improve Joe’s home. In that case, the portion of the inheritance used to improve Joe’s home may be subject to division, entitling Joe to a portion of Sally’s inheritance.

While the original value of certain exempt properties (like pre-marriage ownership or inheritance) is protected, any increase in its value during the relationship may be divisible. This is often evaluated on a case-by-case basis.

Prenuptial agreements, cohabitation agreements, or adult interdependent partner agreements may stipulate different arrangements for property division, including provisions that alter what is considered exempt.

Maintain the exempt status of the property by:

• Ensuring the exempt property is not commingled or mixed with a joint property
• Using separate bank accounts for exempt funds (like inheritances)
• Ensuring proceeds from exempt property that is sold are traceable to another exempt asset
• Considering legal agreements such as prenuptial or cohabitation agreements making certain property exempt

Navigating the division of property in divorce or separation requires careful consideration and planning, especially when it comes to identifying which properties are exempt and keeping these assets separate. Consider calling a Spectrum Family lawyer to assist you.

So, what happens to property owned before marriage or common-law partnership in Alberta?

When it comes to property owned before marriage in Alberta, the division of assets is determined by the Family Property Act (FPA). Under the FPA, there is a presumption of equal division of matrimonial property and debts.

However, certain property is exempt from division upon divorce or separation. This includes assets owned before the relationship, inherited assets, proceeds from a personal injury lawsuit, property received as a gift from a third party, and insurance proceeds.

It is important to note that the exempt property’s market value at the time of marriage or acquisition is exempt, but the increase in value of the exempt property may be divided. The division of the increase in value is not necessarily equal, but it is done equitably.

Evidence is required to prove the existence of exempt property.

Key Takeaways

• Property owned before marriage or a common-law partnership (now known as an adult interdependent partnership) is generally considered exempt from distribution upon marriage breakdown or separation in Alberta.
• Exempt property includes assets owned before the marriage or common-law partnership, inherited assets, gifts from a third party, proceeds from personal injury lawsuits, and insurance proceeds.
• The market value of exempt property at the time of marriage or acquisition is considered exempt, while the increase in value of exempt property may be divided in a just and equitable manner.
• It is important to maintain the exempt status of property by keeping it separate, not mixing it with joint assets, and correctly documenting any sales or transfers of exempt property.

Spectrum Family Law is Here to Help

Dealing with a divorce or separation is challenging enough without the added complexity of understanding how the Family Property Act affects your situation. The good news is you do not have to face these challenges alone. Spectrum Family Law is dedicated to providing support and guidance through this difficult time. Our team will work with you to explore all available options and develop strategies to safeguard your property rights and entitlements. Reach out to our experienced family lawyers today for personalized assistance.

References

Family Property Act, RSA 2000, c F-4.7 https://canlii.ca/t/5636l

Adult Interdependent Relationships Act, SA 2002, c A-4.5
https://canlii.ca/t/53rdx

Hamani v Hamani, 2023 ABKB 360 (CanLII)
https://canlii.ca/t/jxndm

RAO v SDO, 2023 ABKB 316 (CanLII)
https://canlii.ca/t/jz6hz

Friesen v Friesen, 2020 ABQB 103 (CanLII)
https://canlii.ca/t/j54v3

Nyberg v Nyberg, 2015 ABQB 768 (CanLII) https://canlii.ca/t/gmctb

KS v TLS, 2015 ABQB 568 (CanLII)
https://canlii.ca/t/gl4k7

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