What Property Is Exempt From Division in an Alberta Divorce?

The division of property during a divorce can be a complex and contentious process. In Alberta, the Family Property Act (FPA) and Matrimonial Property Act (MPA) govern how property is distributed when a marriage ends.

However, there are certain types of property that are exempt from division and are considered personal assets that do not need to be shared with the spouse. It is crucial to understand and maintain the exempt status of property to ensure its protection.

Exempt property includes gifts from a third party, inherited assets, property owned before the marriage or relationship, awards or settlements for damages, and proceeds from insurance policies. Valuing exempt property can be a source of disagreement, and the increase in value may be divided by the court in a fair and equitable manner.

To maintain the exempt status, it is important to avoid mixing assets and properly document any transfers. Matrimonial contracts can also play a significant role in protecting exempt assets.

Consulting with family lawyers can provide guidance on safeguarding personal property during divorce proceedings.

Key Takeaways

• Gifts from a third party, inherited assets, property owned before the marriage or relationship, and awards or settlements for damages in tort are exempt from property division in an Alberta divorce.
• Proceeds from insurance policies may also be exempt from property division.
• Disagreements often arise regarding the value of property during asset division, and the market value at the time of marriage or property acquisition is the exempt value.
• Maintenance of exempt property status requires that the sale proceeds be traceable into an existing asset, and adding a spouse as a joint owner or commingling the asset with other property can result in losing the exemption.

Key Details about Matrimonial Property Division in Alberta

When it comes to the division of matrimonial property in Alberta, there are key details that individuals should be aware of. Understanding these details is crucial for a fair and equitable division of assets during a divorce. Here are four important points to consider:

• The Family Property Act (FPA) governs property division in Alberta divorce cases when the parties separated after January 1st, 2020. The Matrimonial Property Act (MPA) applies to separations that occurred prior to 2020. Both acts outline the rules and regulations that guide the process.
• Certain property is exempt from distribution upon marriage breakdown. This includes gifts from third parties, inherited assets, property owned before the marriage or relationship, and awards or settlements for damages in tort.
• Maintenance of exempt property status requires that the sale proceeds be traceable into an existing asset, and adding a spouse as a joint owner or commingling the asset with other property can result in losing the exemption.
• Marital contracts, such as prenuptial or postnuptial agreements, can play a significant role in asset division. These agreements protect both parties’ assets, including exemptions, and provide clarity on how property should be divided.

What Types of Property are Exempt From Division?

Exempt property in an Alberta divorce includes assets acquired before the marriage, inherited assets, gifts from third parties, awards or settlements for damages in tort, and proceeds from insurance policies. These types of property are considered personal and are not expected to be shared with the partner during the division of assets.

Assets acquired before the marriage are exempt because they were obtained prior to the union and are often seen as separate property. Similarly, inherited assets are exempt because they are considered the sole property of the individual who received them through inheritance. Gifts from third parties, such as family members or friends, are also exempt from division as they are specifically given to one spouse and not intended for shared ownership.

Additionally, any awards or settlements received for damages in tort, such as personal injury claims, are exempt from division. These funds are meant to compensate the individual for their own loss or suffering and are not considered marital property. Finally, proceeds from insurance policies that do not cover property, such as life insurance or disability insurance, are exempt as they are intended to provide financial support to the individual and their dependents in times of need.

It is important for individuals going through an Alberta divorce to understand and maintain the exempt status of their property. This can be done by keeping records and documentation that prove the exempt nature of the assets.

How Is The Value Of Exempt Property Determined?

The determination of the value of exempt property in an Alberta divorce is based on various factors.

Firstly, the market value at the time of acquisition or marriage is taken into consideration. This means that the value of the property at the time it was acquired or at the time of the marriage is used as a basis for determining its exempt value.

Additionally, contributions made by each spouse or partner towards the property are considered. Financial situations, such as the income and assets of each party, are also taken into account.

Furthermore, any existing agreements between the spouses or partners regarding the property division will be considered. The duration of the marriage or relationship is another factor that may affect the determination of the value of exempt property.

Moreover, any existing court orders that may impact the value of the exempt property will be taken into consideration. Finally, tax liabilities associated with the property may also play a role in determining its value.

Does Property Remain Exempt Matrimonial Property If Sold?

Property in an Alberta divorce remains exempt from being classified as matrimonial property if it is sold. The exemption status of the property does not automatically change upon sale.

However, in order for the property to maintain its exempt status, the sale proceeds must be traceable into an existing asset. If the proceeds from the sale cannot be tracked and linked to an exempt asset, the exemption may be lost.

For example, if an individual sells an inherited house and uses the proceeds to purchase a new home, the exemption status of the inherited property is maintained. This is because the sale proceeds can be traced and connected to the new home, which is considered an exempt asset. On the other hand, if the individual adds their spouse as a joint owner of the new home or commingles the sale proceeds with other marital property, the exemption may be lost.

It is important to note that selling exempt property does not automatically result in the loss of its exempt status. The key is to ensure that the sale proceeds can be clearly traced and linked to an exempt asset.

Seeking legal advice and maintaining proper documentation can help protect the exempt status of property even after it has been sold.

How Marital Contracts Can Help with the Division Of Assets On Divorce

Marital contracts play a crucial role in determining the division of assets in an Alberta divorce. In the absence of a prenuptial agreement, any arrangement or understanding between the couple during their marriage relating to exempt assets may be considered, but will not govern the way the court assesses the division of property. This means that if you want to protect assets, it is essential to have a properly drafted, properly executed, and have received independent legal advice for any agreement to be binding. Property division laws in Alberta operate under the principle of equitable distribution, aiming for a fair, though not necessarily equal, division of matrimonial property. Without a binding agreement, the court will rely on these laws to determine how assets and liabilities are divided. As such, proactively addressing asset protection through enforceable marital contracts is a prudent step to navigate potential outcomes under the property division laws in Alberta.

Marital contracts, such as prenuptial agreements, cohabitation agreements, or postnuptial agreements, ensure the protection of separate property, including exempt assets. These contracts outline how assets will be divided in the event of a divorce and can specify which assets are exempt from division. By having a legally binding agreement in place, you can have more control over the division of your assets and protect exempt property from being included in the marital property.

Consulting with family lawyers who specialize in matrimonial property can provide guidance on how to protect exempt assets and ensure that your marital contract is properly drafted and executed. With the help of these professionals, you can navigate the complexities of asset division in an Alberta divorce and safeguard your assets.

What if the Exempt Matrimonial Property is in Joint Names?

How does joint ownership impact the exemption status of matrimonial property in an Alberta divorce?

When an exempt asset is put into joint names with a spouse or partner, current Alberta case law states that half of the matrimonial property exemptions are lost. This means that the law considers half of the exempt property to be gifted to the marriage. As a result, you would retain 75% of the asset, while your spouse would receive 25%. It is important to exercise caution when transferring ownership of exempt property in this manner to avoid losing a significant portion of its exemption status.

If a gift from a third party is intended for both spouses, there is no exemption for that property. Therefore, it is essential to be mindful of the ownership and use of exempt property to protect its exempt status during divorce proceedings.

What if my Spouse was Added as a Joint Owner of the Exempt Property?

If a spouse is added as a joint owner of exempt property in an Alberta divorce, it can impact the division of assets. Adding a spouse as a co-owner or joint owner to exempt property results in the loss of part of the exemption. This means that the asset is no longer considered solely owned by one party and is subject to division.

Additionally, if the exempt property is commingled with other property or funds, it can lose its traceability, leading to the loss of the exemption entirely. It is crucial to maintain the separate and exclusive ownership of exempt property to retain its full exemption value. This can be done by keeping the asset in the original person’s name or ensuring that the funds are traceable into an account in the sole person’s name.

To protect the exemption status of matrimonial property, it is crucial to maintain its separate and distinct ownership. Adding a spouse as a joint owner or commingling the asset with other property can result in the loss of the exemption. If joint ownership is necessary, it is advisable to consult with a family lawyer to explore alternative options that can help preserve the exempt status of the property.

Conclusion

In conclusion, understanding the exemptions for property division in an Alberta divorce is crucial for protecting personal assets. Exempt property includes gifts, inheritances, pre-marital assets, tort awards, and insurance proceeds.

The valuation of exempt property may be divided by the court in a just and equitable manner. To maintain the exempt status of property, it is important to avoid commingling assets and document transfers.

Matrimonial contracts and consultation with family lawyers can provide guidance for safeguarding personal property.

References

Family Property Act, RSA 2000, c F-4.7
https://www.canlii.org/en/ab/laws/stat/rsa-2000-c-f-4.7/latest/rsa-2000-c-f-4.7.html

Goddard v Goddard, 2024 ABKB 99
https://www.canlii.org/en/ab/abkb/doc/2024/2024abkb99/2024abkb99.html

Harrower v Harrower, 1989 CanLII 221 (AB CA)
https://www.canlii.org/en/ab/abca/doc/1989/1989canlii221/1989canlii221.html

E.J. v R.J., 1989 ABCA 197
https://www.canlii.org/en/ab/abca/doc/1989/1989abca197/1989abca197.html

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