Dividing property after a separation can often be complex and technical, particularly when the period of separation spans over a number of years, rather than months or weeks. How do you determine what is yours to keep outright and what should be shared with your spouse?
Here are the basics of what you need to know:
FPA or MPA?
If you and your spouse separated after January 1, 2020, the Family Property Act (FPA) applies to you. If you separated prior to January 1, 2020, the Matrimonial Property Act (MPA) applies. The difference between the two primarily affects common-law partners or married couples who cohabited as common-law partners prior to marriage. According to the Adult Interdependent Relationships Act, partners are considered to be common law, or Adult Interdependent Partners (AIPs), when they have lived together in a relationship of interdependence for a period of 3 continuous years, or when they have a child together, whichever is earlier.
The difference between the FPA and MPA comes into play when determining which of the categories below a particular property falls under. Under the FPA, property acquired during the marriage or adult interdependent partnership is presumed to be equally divisible (section 7(4) property). According to the MPA, only property acquired during a marriage is presumed to be equally divisible, not property acquired during the period prior to the marriage where the parties were cohabiting as AIPs. Property acquired by one or both spouses prior to the marriage falls under Section 7(2) of the MPA, which is presumed to be exempt property.
Under the newer FPA, AIPs are treated the same as married persons, for the purposes of property division. This also means that FPA examines the entire period of cohabitation, not just during the period of marriage.
FPA – THREE CATEGORIES OF PROPERTY
Property is considered to include assets, as well as debts. The Family Property Act (FPA) contemplates three categories of property:
Section 7(4) Property: Presumed 50/50 Division
This category of property is property acquired by one or both spouses during their relationship, not before or after it. Section 7(4) property is considered a product of the marriage or adult interdependent partnership, created by the efforts of one or both spouses during the relationship. As a result, this category of property is presumed to be equally divisible between the spouses.
Section 7(2) Property: Exempt Property
This category of property is presumed to be exempt from division. In order to fall under this category, the property must be:
- Acquired by one spouse before they became AIPs with the other spouse, regardless of whether the parties married or not,
- Acquired by one spouse before marriage if the parties never cohabited as AIPs before marriage,
- Acquired by a spouse as a gift from another party,
- Acquired by a spouse by inheritance,
- An award for damages in tort in favour of one spouse, or
- An insurance payout in favour of one spouse.
These types of property are acquired outside of the partnership and thus, are yours to keep outright. Note that if you are claiming certain property as exempt from division, you must prove that the exempt property still exists or can be traced. If the exempt property has been intermingled with joint property of the relationship, you may lose a portion of your exemption.
Section 7(3) Property: Just and Equitable
This category of property is neither presumed to be shared nor presumed to be exempt from sharing. If it is to be shared, it will be in a manner that is “just and equitable”. Property falling under this category includes:
- The increase or decrease in value of exempt assets during the relationship;
- Property acquired after separation;
- Property acquired from the income from exempt property; and
- Gifts from one spouse to another.
The general approach taken by Courts in dividing section 7(3) property is based on similar principles as section 7(2) and 7(4) property. The question the Courts will ask is: Is the property a product of the partnership, did it arise from outside the relationship, or is it a combination of the two?
Often, the line between a particular property being a product of a relationship or arising outside of it is blurred, thus a hybrid approach is warranted. Courts will divide this class of property to the degree the property is a product of the relationship by taking into account a list of factors listed in section 8 of the FPA. These section 8 factors allow the Courts to consider the contribution of the other spouse in acquiring the property in question, when the property was acquired, the duration of the relationship, and the financial positions of both parties in arriving at a division that is “just and equitable” given the circumstances.
If you have questions about how your property may be dividing following separation, contact Hayes Fry Law. We’re redefining the practice of family law.