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Lorne MacLean, Partner at MacLean Family law Group and the Attorney General of BC Representatives Discuss the Upcoming Changes to the BC Family Relations Act at CBA Vancouver Family Subsection Meeting

BC married and common law persons in strained BC family law relationships who own BC family assets and those considering getting married in BC who have family property need to be aware that big family property division changes are coming to British Columbia’s Family Relations Act, the law governing property division for married couples and the law that will likely soon do the same for many unmarried couples living in marriage like relationships.

Property division laws in BC are the subject of a broad ranging proposal for change as part of the new Family Relations Act Reform White Paper that is expected to form legislation in 2011. The changes are dramatic and parties need to review their positions now to see whether the old or new regime better meets their goals should their relationship be on shaky ground.
British Columbia’s Family Relations Act Property Division Regime has been criticized as too complex and on other grounds such as:

- granting Judges too much discretion in deciding what assets should be divided and then in deciding in what proportion they should be divided either equal or unequal. Many of theses concerns were raised in the SCC case of Young v. Young where Mr. MacLean, founding Partner of the MacLean Family Law Group obtained a 100 percent reapportionment of the family home for his client and where the issue of family debts was clarified.

- the procedure can be time-consuming and expensive as it is not always easy to determine whether an asset has been used for a family purpose.

- the current regime treats similar kinds of property differently. For example, RRSPs, including the amount accumulated before marriage, are subject to division while the general rule for pensions is that the pre-marriage portion is not divided.

- the current law does not provide sufficient clarity about what to do with certain kinds of property, such as gifts, inheritances, ventures, court awards and income tax refunds.

- the current law does not specifically address division of debts although Mr. MacLean did argue how debts could properly taken into account under the current regime in the SCC decision Young.

BC Government’s Recommended Policy
It is proposed that the new family legislation move to an excluded property model that involves less judicial discretion, particularly at the initial stage of identifying which assets are subject to division.
Family property will include all real and personal property owned by one or both spouses at the date of separation unless the asset in question is excluded, in which case only the increase in the value of the asset during the relationship is divisible. Whether an asset was ordinarily used for a family purpose will not be relevant in deciding if it is family property.
Proposed exclusions include:

ï‚· gifts and inheritances to one spouse;
ï‚· settlements or damage awards from tort claims, except that part meant to compensate
both spouses or to replace wages;
ï‚· non-property related insurance proceeds, except that part meant to compensate both
spouses or to replace wages;
ï‚· pre-and post- relationship property; and
ï‚· trust property, unless the beneficiary spouse has an immediate and absolute interest in the
trust property or has the power to terminate the trust.

Where there is a dispute about whether an asset is excluded property, the person claiming the exclusion will bear the burden of proof. While spouses will share in the increased equity in an excluded asset, there remains an outstanding policy issue of what to do with decreased equity in an excluded asset.

The Government says the most compelling reasons for moving to an excluded property regime are to make the law simpler, clearer, easier to apply, and easier to understand for the people who are subject to it. They argue the new model seems to better fit with people’s expectations about what is fair. They “keep what is theirs,” (such as pre-relationship property and gifts and inheritances given to them as individuals) but share the property and debt that accrued during their relationship. Where one spouse enters the relationship with more assets than the other, providing that spouses share the increase in the value of the excluded property promotes a fair outcome. For example, assume one spouse enters the relationship with a house and a mortgage. During the relationship, the spouses pay down the mortgage and invest in renovations to the house. Upon separation, the spouse who brought the house into the relationship retains the value the house had at the beginning of the relationship, and the associated mortgage. The spouses share in the increased equity flowing from renovations and mortgage payments over the duration of the relationship.

Changing to an excluded property scheme removes the broad judicial discretion from the asset identification stage and leaves some discretion at the distribution stage. This change is designed to make it easier to identify property subject to division and, therefore, reduce the potential for disagreement.

As with the current law, the new property division scheme will presume a 50-50 division of all family property but strangely the court will still have the power to divide assets unequally if it would be clearly unfair not to do so and the court could in rare circumstances even divide the excluded assets! The new law will also presume family debts are to be equally divided.

The biggest change of all however, is the proposal to treat common law spouses who have lived together for more than 2 years or who have a child in a relationship of some permanence THE SAME AS MARRIED PERSONS FOR PROPERTY DIVISION PURPOSES.

Call us province wide at 1-877-602-9900 if you wonder what regime is more favourable to your situation and whether a marriage agreement makes sense for you.

Lorne MacLean