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Avoid BC Excluded Property Mistakes

Avoid BC Excluded Property Mistakes so that your excluded property is not inadvertently converted to equally shareable family property. They say “nice guys finish last” and this can be true unless you learn how to avoid BC excluded property mistakes. Our new BC Family Law Act and the common-law “presumption of advancement” can cause problems for people who bring substantial assets into their new marriage or marriage-like relationship. Today we want you to understand how intention plays a big part in these BC excluded property disputes. Our top-rated MacLean Law family lawyers help our clients avoid BC excluded property mistakes by having them document their intention regarding their excluded property in written family agreements.

Avoid BC Excluded Property Mistakes

In today’s blog, senior lawyer Jonathan Wai of MacLean Law’s Vancouver office explains how Excluded Assets may inadvertently become Family Assets, and also how to avoid this trap, before a relationship starts, during it, or after it ends. This blog will hopefully help you avoid BC excluded property mistakes.

In today’s modern world, Vancouver and BC spouses are free to arrange their finances as they see fit.  If they end up separating, the BC Family Law Act provides for “excluded” assets, which includes that the value of the assets each spouse had before the relationship began is “excluded” from the division between them (though the gain in value will likely be divided between them).  And similarly, some assets acquired during the relationship, such as gifts and inheritances to one spouse alone or personal injury settlements, enjoy the same protection.

Before separation, however, many spouses do not think of such things.  An asset that they had prior to the relationship and registered in their name alone, might be sold during the relationship, and become the family home registered in joint names.   A personal injury settlement might be used to pay family expenses or to purchase another family property.  This is normal during a relationship.  But what happens to the money if the spouses separate?  Is it still an excluded property asset?

As explained in the decision of the Court of Appeal in Namdarpour v. Vahman, 2019 BCCA 153, it all depends on the intent at the time.  While that sounds simple, the court noted previous court decisions had struggled with this issue, namely, whether a court is required to consider long-held evidentiary presumptions, which had their origins in “sometimes anachronistic notices of economic dependence” (para 33), which are “in contrast to contemporary circumstances”. In Namdarpour the trial judge held the joint use of excluded monies deposited to a joint account along with income splitting of an asset bought with funds from this account caused the exclusion to be lost. The BC Court of Appeal agreed.

So How Do You Avoid BC Excluded Property Mistakes?

After reviewing previous cases, the court stated that:

[40] These decisions emphasize that evidentiary presumptions operate only where the trial judge is unable to reach a conclusion about the transferor’s actual intention at the time of transfer. In my view, the following principles can be discerned from the case law:

(1) a conclusion about intention is only to be determined after consideration of “all the circumstances” of the case;

(2) those circumstances include both direct evidence and, importantly, circumstantial evidence;

(3) those circumstances include evidence that arose subsequent to a transfer if relevant to the transferor’s intent at the time of transfer, although such evidence will be reviewed critically; and

(4) only where a judge is unable to reach a conclusion about the transferor’s actual intention will the evidentiary presumption operate. [emphasis added]

In this case, there were not one, but two potentially excluded assets:  each spouse had separately received settlement funds during the marriage.  In applying the above analysis, the court noted:

[45] Mr. Vahman submits that the critical difference between Ms. Namdarpour’s settlement funds and his own settlement funds, which warrants their different treatment, is that Ms. Namdarpour’s funds were spent on consumables—rent and inventory—and thus cannot be traced to any extant tangible asset. While at this stage in the analysis, this may be a distinguishing feature (see s. 85(1)(g) of the FLA), in my view, it was open to the trial judge to conclude that the manner in which the joint personal savings account was operated, together with the splitting of rental revenue from the family asset purchased, was evidence of Mr. Vahman’s donative intent. Control and use of funds in a joint account may be evidence of intention: Pecore at para. 63. The judge’s finding of fact is deserving of deference from this Court.  [emphasis added]

However, the court was also careful to note that:

[46] I am not suggesting that merely depositing funds to a joint account in any given case is alone persuasive evidence of donative intent. In this case, there was a pattern of activity in the use of the joint account, by both parties, with respect to excluded property, together with income-splitting on the use of the family asset purchased with the proceeds. In every case it is incumbent on the trial judge to ascertain the intention with which a transfer is made, using both the direct and circumstantial evidence available. The judge did this when he concluded there was donative intent. I would dismiss this ground of the cross appeal. [emphasis added]

Be Careful and Take Steps To Confirm Intention In Advance

As you can see, “intent” can be difficult to discern, especially when it is long after the excluded asset has been changed.  However, the case-law is now clear.  These principles are applicable to any relationship. To Avoid BC Excluded Property Mistakes you should at a minimum keep excluded property separate and not comingle it or use it to buy joint assets.

If you are considering entering into a relationship, you may wish advice or a written Agreement to protect your excluded property by confirming in writing that it will not be shared and even consider contracting that the gain may not be shared.  If you are in a relationship, even if you have no concerns about separating, it is valuable that each of you and your spouse gets advice on how you deal with your excluded assets, and perhaps enter into a written Marriage or Cohabitation Agreement, such that you know how to protect your excluded property, should the relationship end.

Avoid BC Excluded Property Mistakes 1 877 602 9900

And if your relationship has ended, you may wish advice on what arguments may be made as to the intent of a change of an excluded asset, so you may have the best protection possible.  The experienced senior family lawyers at MacLean Law would be happy to assist you at any of our offices in Vancouver, Surrey, Fort St. John, Kelowna, or Calgary.