Property Division
Property division issues can be complex.
Some assets have tax considerations while other assets such as the sale of a principal residence, do not. Despite such issues, the starting point in dealing with property division is identifying what constitutes family property. If an asset is not considered family property, it is not subject to a claim by the other spouse. Even if an asset is properly characterized as family property, its equal division is not a certainty.
Under the Family Law Act, there are a number of considerations the courts must examine in dividing property. The court will consider family debt. Family debt is also divisible and is usually done so in conjunction with family property.
There are two other important concepts: excluded property and unequal division.
Section 85 of the Family Law Act sets out the category of property that is excluded from division. Excluded property includes property that one spouse had prior to the relationship, an inheritance a spouse receives, as well as gifts a spouse receives from a non-spouse. There are numerous other categories in considering excluded property which needs to be identified in dealing with property division claims. Even after taking into account these and other considerations, a court can still equalize division or provide more than 50% of family property to one spouse based on the notion of unequal division as set out in Section 95 of the Family Law Act. Most of the subsections under Section 95 of the Family Law Act are “common sense” provisions although their application can be complex.
Moreover, in dealing with all of these concepts, part of what is required in advancing a claim is determining the value of assets both at the time of division and, when dealing with issues of excluded property, at the time the relationship between the spouses began. As an example, let us assume at the beginning of the relationship one spouse owns nothing and another spouse has a home worth $300,000 but has a $200,000 mortgage. The equity in the home at the commencement of the relationship is $100,000. In the result, it is the $100,000 that later can be argued be deducted from value as excluded property. If years later spouses separate and the house is worth $500,000 and the mortgage is $100,000 the net equity is $400,000 which would normally be divided equally. However, the overall “lift” of the property is the $400,000 less $100,000 in excluded value resulting in $300,000 to be divided. Interestingly enough, the Family Law Act allows for the division of the increase in the value of an asset owned prior to the relationship but not for a decrease in its value.
Part of property division considerations can also include business valuations and understanding how valuators provide opinions regarding value. Sometimes those opinions have to be challenged.