Calgary Exempt Property Lawyers 403-444-5503
Calgary Exempt Property Lawyers explain to their clients that when you divorce in Calgary there are three key property division rules for divorcing parties. These rules do not apply to common law spouses in Alberta, although in BC common law spouses who have lived together for more than two years are treated the same as married persons. Our Alberta Matrimonial Property Act has 3 categories of property.
- Equally Shared Property
- Exempt Property
- Shareable property
MacLean Law’s Calgary Exempt Property Lawyers, tell our medium to high net worth clients, that Calgary equally shared property gets divided presumptively on an equal basis. However, our top Calgary Exempt Property Lawyers advise that certain types of property such as:
- Real or personal brought by one spouse into the marriage
- assets inherited by one spouse
- personal injury lawsuit awards
- gifts to one spouse from a third party and
- certain types of Insurance proceeds
are subject to special property division rules as is the gain made on these exempt assets.
These types of property are called Calgary exempt property and the gain on these assets is called shareable property. Calgary Exempt Property Lawyers at MacLean Law know these types of property don’t depend on a joint effort or contribution by the parties whether it be financial or through being a great homemaker and child caregiver. Rather this class of asset arose either before the relationship or came to a party during the marriage but from a source unconnected to joint family effort.
Calgary Exempt Property Lawyers Know Exempt Asset Must Still Exist
Calgary Exempt Property Lawyers educate their clients that it is crucial there be evidence that asset still exists or evidence where it can be proven to be traced into a new property that is not in joint names with the other party. Calgary Exempt Property Lawyers want you to know that the rules for Calgary exempt property operate so as to exclude from division the exempt property’s starting market value for assets owned by one spouse alone when the marriage started or when the asset was acquired in cases of gifts, inheritances, insurance proceeds and certain injury damage awards.
A recent Alberta Queen’s Bench decision of Grant v Grant, 2016 ABQB 198 (CanLII) went over the rules and what the impact was if any of fluctuations in the value of exmpt property and loans against this property during the marriage:
[74] I will now deal with the Husband’s Home. This home was purchased by Mr. Grant before the marriage and has never been put into joint names. The present value of this house as established by appraisal is $348,000. This property is encumbered by a mortgage registered in 2010. The present value of which is approximately $256,230 leaving an approximate current equity of $91,770. None of this is contentious.
[75] The parties disagree, however, as to the value of Mr. Grant’s exemption in this home. A historical search shows it was purchased on December 20, 1988 for $85,500, before the marriage.
[76] Ms. Grant has two arguments respecting Mr. Grant’s claimed exemption in the Husband’s Home. She first argues that having failed to lead evidence of the value of the home at the date of marriage, Mr. Grant has failed to prove the value of his exemption and thereby failed to prove his exemption. She argues that I cannot infer the value of the home at the date of marriage from any of the evidence that was tendered.
[78] I conclude based upon this evidence that the value of the Husband’s Home on the date of the marriage was $85,000.
[79] Ms. Grant’s second argument is that Mr. Grant lost his exemption in the Husband’s Home when the balance of the HELOC mortgage exceeded the value of Mr. Grant’s exemption in the Husband’s Home. The HELOC funds were used to meet the couple’s everyday expenses, to pay off credit card debt and to purchase another rental home on the evidence. Ms. Grant says that drawing down these funds completely exhausted Mr. Grant’s exempt equity in the Husband’s Home. Ms. Grant says that because of this, the exempt funds cannot now be traced into the present value of the home, notwithstanding that there is now equity in that home that exceeds the amount for which it was purchased. Alternatively, Ms. Grant says, even if the exemption survived the drawing down of funds in the HELOC, when it was discharged in 2010 and a new mortgage was registered against the Husband’s Home to obtain funds to build the Matrimonial Home, any exemption that survived is traced into the Matrimonial Home. At most, Ms. Grant says $37,500 of the original equity in the Husband’s Home can be so traced. She says as well that the maximum value of Mr. Grant’s exemption has been reduced to $18,750 because the Matrimonial Home is in joint names.
[80] Mr. Grant disagrees. He cites Carmichael v. Carmichael 2007 ABCA 3 (CanLII) as authority for the proposition that it is the market value of the property on the date it was acquired that is exempt from distribution. Thus, he says the value of the exemption is clear. It is the purchase price. Further, he says this case makes it clear that encumbrances against the home are of no relevance since it is the ‘market value’ of the home not the net equity that is exempt.
[81] I agree. Section 7(2) of the Matrimonial Property Act provides that it is the “market value” at the date of acquisition of a property that is exempt from distribution. Section 7(3) then provides that it is the difference between the exempt value of the property and the “market value at the time of trial” that may be distributed.
[82] But the original value of the exemption is only half the equation. The second issue is whether the exemption has been lost. Mr. Grant’s argument appeared to be that since it is the market value that is exempt, fluctuations in equity are irrelevant.
[83] Ms. Grant’s argument is premised on the proposition that as equity is eroded, so too is the exemption. There is case law that appears to support her argument. Many cases deal with what happens to an exemption which is, or is invested in, an asset that depreciates in value over time. Vehicles are a good example of this type of an asset. In these cases, the courts have found that the exemption decreases in value as does the asset so that if the asset becomes worthless, the exemption disappears. See for example Brokopp v. Brokopp (1996) 1996 ABCA 4 (CanLII), 181 A.R. 91, [1996] A.J. No. 77; Lovich v. Lovich, 2006 ABQB 736 (CanLII).
[84] I conclude, however, that those cases are distinguishable from the situation here.
[85] I begin my analysis with the wording of the Matrimonial Property Act itself. The relevant provision is s 7(3) which provides that it is the difference between the exempted value of the property and the market value of the property “at the time of trial” that may be distributed between the parties. As I have already said, the exempted value of a property is established by s 7(2) as the “market value of that property…on the date on which the property is acquired”. Thus, by the wording of the statute, the two relevant dates for determination of the value of an exemption are the date of acquisition and the date of trial.
[86] The Act says nothing about fluctuations in the value of a property between those two dates, and it would appear therefore that such fluctuations are irrelevant.
[87] If Ms. Grant is correct, then fluctuations of equity in an exempt property during the course of a marriage would affect an exemption. For example, if a party brought a home worth $100,000 into a marriage on year one, if at year 5 of the marriage, the market value of that home had decreased to $75,000 because of a falling real estate market, then even if the market value of the home increased to $150,000 by the time of a divorce in year 10 because of a rising market, the party’s exemption would still have been caught by the earlier downturn and be limited to $75,000. If that interpretation is correct, then parties would be forced to obtain historical valuations of exempt property if it was suspected that a property had decreased in value over the course of the marriage, thereby greatly increasing the complexity and the expense of matrimonial property trials. That cannot have been the intention of the Legislature.
[88] The numerous cases that conclude that when an exempt property is sold, if the proceeds are dissipated or otherwise cannot be traced into after acquired property, the exemption is lost, are also distinguishable. There is one crucial difference between those cases and the case at bar. Here, the Husband’s Home was never sold or otherwise alienated. Thus, there is no tracing issue.
[89] As a consequence, in my view, Mr. Grant has maintained his exemption in the amount of $85,000 and the distributable value of the Husband’s Home is $263,000, less the mortgage balance at the date of trial.
