When married couples decide to part ways, one of the things that needs to be determined is what to do with all of the stuff that they’ve amassed during the relationship.
In Canada, the law of divorce falls within the federal sphere of power but the division of a married couple’s property is governed by provincial law. In Alberta, that law is the Matrimonial Property Act (MPA). The MPA empowers a court to distribute the property owned by either or both of the spouses.
(The MPA does not apply to unmarried couples. We will discuss how property for unmarried or “common law” couples gets divided in a future blog post. Stay tuned!)
The general concept is that spouses are financial partners in a marriage and, broadly speaking, each spouse has a claim to half of the value of the property that the couple acquired during the marriage. This means that it usually doesn’t matter whether a car is registered in only one spouse’s name or whether the home the couple lives in has only one name on the title – each spouse has a claim to half the value of that property if it was acquired during the marriage.
However, not all property owned by a spouse is necessarily subject to an equal split. The MPA identifies three broad categories of property and how they are dealt with:
1) Exempt Property. Certain property is exempt from being distributed as matrimonial property, based on the idea that not all property falls within the financial partnership of a marriage. This category includes gifts from third parties, inheritances, property that was owned before the marriage, awards for damages (such as an award in a slip-and-fall lawsuit) and proceeds of certain insurance policies. The value of the property at the date of the marriage or at the date the thing was acquired (whichever is later) is exempt from distribution.
2) Increases in the Value of Exempt Assets. The court must order a “just and equitable” distribution of property for the increase in value of an exempt asset or the income generated by an exempt asset for the period of the marriage. For example, the value of a collectible car owned by one spouse before the marriage is exempt, but the increase in its value over the course of the marriage – the accrued equity – is subject to a “just and equitable” division (which is not necessarily 50/50). Determining what is “just and equitable” requires the court to consider a variety of specific factors. For example, one such factor that the court will consider is any contribution (financial or otherwise) made by a spouse (or on behalf of spouse) in relation to the acquisition, conservation or improvement of the property.
3) Everything Else. If the property does not fall into the first two categories, then its value is subject to division between the parties. This is typically an even-steven split but it doesn’t have to be, if the court thinks that an even split would actually be unfair.
Most of the time, couples are able to come to an agreement on how they will split their property. The MPA specifically allows couples to make agreements that opt out of the MPA default rules for dividing property, so long as the agreement is in writing and both spouses have independent legal advice before signing. For the times when a couple doesn’t agree, Alberta courts rely on the MPA to determine the division of property.
If you have questions about divorce and your legal entitlements to property, Patriot Law Group can help.