Calgary Division of Increase in Exempt Family Property are tricky and top Calgary high net worth family lawyers will help guide you. As we have repeatedly indicated in previous articles, division of family property in Alberta is not always easy, see: Interim Family Property Distribution) as well as Preventing Dissipation of Calgary Family Property
Our top rated high net worth Calgary family lawyers handle Calgary Division of Increase in Exempt Family Property cases on a daily basis.
In today’s blog Peter Graburn explains how Calgary Division of Increase in Exempt Family Property works.
Calgary Division of Increase in Exempt Family Property
As previously stated, in its simplest terms, division of family property includes dividing all family property (assets and debts) after taking out all non-family (ie. exempt) property. The Supreme Court of Canada in Moge ( 3SCR 813) stated that the equitable distribution of family property was an essential aspect of providing for an equitable distribution of the economic consequences of marriage breakdown. But what about the increase in value of that exempt (ie. non-family) property generated during the relationship? That’s tougher. Is it shared equally, equitably, or not at all? For general property information division click here.
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The Alberta Family Property Act codifies the division of family property upon the breakdown of a (married or “common-law”) couple’s relationship under two sections. Section 7 creates a general presumption of an equal distribution of non-exempt family property (unless it would not be “just and equitable” to do so). Section 8 provides a number of considerations that could lead to an unequal distribution of family property. As Justice Schultz stated in Peregrym v. Peregrym (2015 ABQB 176) at para.’s 67-69 (also in Mueller v. Mueller, 2014 ACQB 536 at para.’s 91 – 93):
“Presumptively, property acquired during the marriage is the product of a social and economic partnership which ought to be shared equally. I find support for this proposition in Crosby v. Crosby, wherein Veit J. says that the MPA presupposes a ‘social and economic partnership’ or, as it is sometimes expressed, this property is presumptively the ‘fruits of the marriage’…
Conversely, property acquired outside of the marriage does not carry any presumption of sharing because, from a principled standpoint, it is not the product of the marriage partnership. Usually, it is relatively straightforward to identify such property, whether gifts from a third party, an inheritance, compensation from a personal injury lawsuit or after acquired property, and it is relatively easy to see why these categories of property ought not to be presumptively shared equally by the marriage partners…
Furthermore, as I held in Mueller, property that can be considered “s 7(3) property” is neither presumptively shared nor presumptively exempted from sharing: rather, if it is to be shared, then the sharing must be put through the “just and equitable” prism factors in s.8.Property interest in this category include:
- the increase in value of exempt assets,
- property acquired after a judgment of judicial separation,
- property acquired after divorce, and inter-spousal gifts.
If the precept stands that marriage is a social and economic partnership, then it is easy to understand that this category of property is sometimes a product of the marriage but often it is not, or it can be partially the product of the marriage and partially not.”
Simple, right? Not really.
Increase in Value of Calgary Exempt Property
Fortunately, Alberta cases have given some direction as to when an increase in value of exempt property is (or is not) shareable, and some of the s.8 “just and equitable” factors the Court looks at in determining this. One of the leading cases in this regard is Sparrow v. Sparrow (2006 ABCA 155), where the Alberta Court of Appeal denied a sharing of the increase in value of an otherwise exempt cottage property as the increase was largely due to market forces and a corresponding rise in the value of the property, as opposed to anything done by the parties (ie. payment of taxes, maintenance or renovations to the property, etc.).
In a more recent case (see Rusnak vs. Covey 2014 ABQB 390), Alberta Court of Queen’s Bench Justice R.E. Nation, (in a case involving various forms of property including the matrimonial home), stated (at para. 20):
“In terms of the increase in value of exempt property, the law is clear that the presumption of equality cannot be applied to this classification of property. A court must look at the full range of the factors set out in section 8, in determining what is just and equitable. In Sparrow, the Court of Appeal pointed out that, although a factor by factor analysis is not necessary, one has to keep in mind the section 8 factors. This consideration should include an overall view, considering factors such as: the reason for the increase in value of the property, (ie. was it solely as a result of the type of property or the efforts of the parties?) as well as the specifics of how the property was treated in the matrimonial regime. Every case must be considered on its own merits.”
“Every case must be considered on its own merits” – great. Fortunately, Justice Nation went on (at para. 22) to refer to other Alberta cases that have considered sharing the increased value of exempt property, including:
● Gardiner v. Gardiner (1996 CanLii 19969) – where the increase in value of the Wife’s exempt investments were divided equally, despite the fact they were held in her name or jointly with her father;
● Hopwood v. Hopwood (1983 CanLii 1162) – where the large increase in value of the Husband’s law firm since marriage was divided unequally;
● Kremp vs. Kremp (1988, 92 AR 188) – where the increase in value of one party’s rental home was divided unequally, and;
● Peters vs. Peters (1999 ABQB 874) – where the increase in value of a Wife’s US investments were completely excluded from division, on the basis that it was essentially the Wife’s inheritance and she did not stand to benefit from any inheritance by the Husband.
As Justice Nation concluded (at para. 23):
“The cases related to the increase of value of an exempt asset are many and varied, fact dependant and are based on the question of what is just and equitable in all the circumstances of the case.”
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