BC Excluded Property Division by Prior Agreement is an issue we get many questions on. In today’s blog, MacLean Law senior associate Jonathan Wai explains what excluded property- is and isn’t- and how parties can make agreements on excluded property.
BC Excluded Property Division by Prior Agreement
Dividing family property after separation can be highly stressful for couples. With the Family Law Act, the concept of “excluded” property seeks to make that simpler than the previous law, whereby the value of assets each spouse had at cohabitation is “excluded” from division, as well as things during the relationship, like inheritances, gifts to one spouse alone, or legal settlements. But wait: what does excluded property really mean?
MacLean Law handles ultra high net worth family and excluded property cases involving international assets. We won Canada’s Family Law Firm of the Year for 2024 from prestigious Canadian Lawyer Magazine and have been nominated for the award 3 times straight from 2023-2025.
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Excluded property is a bit of a misnomer in British Columbia because he gain on the excluded property during the relationship, though is shared, the logic being this is the “family” property, attributable to the family, rather than to the spouse alone.
What Happens To FLA BC Excluded Property If Transferred Into Joint Names?
But what happens when one spouse’s excluded asset is transferred into joint names? The sale proceeds of a previously owned condo, for example, goes into the family home in joint names, or an inheritance is used to help pay off the mortgage of the family home. Before the update to the Family Law Act in May 2023, courts tried to determine the “intent” of doing so. Was the transfer intended to effectively be a gift to the other party, such that the exclusion was lost? Or did the party with the exclusion always intend to keep their exclusion, despite transferring the asset into joint names.
It is not difficult to see how this would cause confusion between spouses separated, often many years after such a transaction, in trying to figure out what the intent was from years before, when spouses doing such things often do not consider the Family Law Act at the time, get legal advice, or write down their intent in a legal document, they are just trying to live their lives together.
Given this led to uncertainty and lengthy court decisions, the change to the Family Law Act in May 2023, that applies only to family law court cases filed after May 2023, stated at s.85(3) that the exclusion remains, despite any transfer of legal or beneficial title of the asset. On its face, this seems clear, in that the exclusion is kept, despite the change of title, and despite any intent that might have existed at the time.
Or is it? What is sometimes forgotten is, there was another change to the Family Law Act at that time, regarding s.96(b)(ii), as below, regarding Division of Excluded Property by Prior Agreement.
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96 The Supreme Court must not order a division of excluded property unless
(a)family property or family debt located outside British Columbia cannot practically be divided, or
(b)it would be significantly unfair not to divide excluded property on consideration of the duration of the relationship between the spouses and one or more of the following factors:
(i)a spouse’s direct contribution to the preservation, maintenance, improvement, operation or management of the excluded property;
(ii)the terms of any agreement between the spouses respecting the excluded property, other than an agreement described in section 93 (1) [setting aside agreements respecting property division], including but not limited to terms respecting the transfer of the excluded property;
(iii)if the Supreme Court makes a determination under section 95 (1) [unequal division by order] respecting significant unfairness, the extent to which the significant unfairness cannot be addressed by an unequal division of family property or family debt, or both.
Section 96(b)(i), regarding contributions, existed previous to May 2023, and has been covered by a number of court decisions, described by our own Lorne MacLean KC in his recent blog BC Division Of Excluded Property Lawyers – MacLean Family Law
Agreements Regarding BC Excluded Property Division Tel: 604 602 9000
But what about agreements under s.96(b)(ii)? There seems far less court decisions on BC Excluded Property Division by Prior Agreement . That said, it likely means we are not still looking at the “intent” of the transfer, as happened under the previous version of the Family Law Act. The inquiry here is whether or not there was an “agreement” with respect to the excluded property, a higher standard than simple intent. The SCC in Anderson in 2023 said kitchen table agreements may be upheld even without legal advice. And of course, whether it would be significantly unfair not to divided that excluded property between the spouses, in light of that agreement.
Given the comparative absence of caselaw on that point, some guidance can be found in the Legislative debate that led to that section. More particularly, as in the Committee debate on April 3, 2023 (Hansard, Fourth Session, 42nd Parliament (2023)), the Provincial Legislature indicated:
- An agreement does not necessarily need to be a full written, witnessed agreement as in s.93(1) of the Family Law Act (referring to signed and witnessed prenuptial/marriage, cohabitation, or separation agreements), it could be an unwitnessed, or possibly even verbal agreement;
- The concept of proving an agreement like this is taken from s.95 of the Family Law Act, which itself allows the court to consider an unwitnessed or oral agreement in the context of unequally dividing family property, and from which there is a “rich amount of case law when it comes to the different factors that would set out what constitutes an agreement”
- It is “broad enough” to include not just real estate, but pre-existing business assets or any other property that is excluded property.
Legislative debate, of course, is not necessarily determinative, but the logic seems reasonable. It will be interesting to see how courts interpret the above.
More practically, and for spouses in this situation, the inquiry into any excluded asset that was transferred into joint names is likely to be:
- What was discussed before and at the time of the transfer?
- Was there a specific agreement that that the property be shared as family asset, and the exclusion lost, even if those words were not used, and when did this occur?
- If there was not a specific discussion, what was discussed, including were there other aspects that may or may not qualify as an agreement, i.e. joint names for survivorship only, or to get a better mortgage rate, for ease of transferring monies, or avoiding creditors, or anything else?
- What were the terms of the agreement, including was there anything offered in exchange for the transfer, or any acceptance of responsibility for the joint asset, or other discussion about each spouses’ role or contribution in the relationship, that specifically relates to the excluded asset in question?
- Did the parties conduct themselves in accordance with the agreement, in the years that followed, including at other, later, significant decision points in their relationship, such as buying or selling that or a different real property, having children, moving, new job or other such events?
- What is the evidence available of the agreement, beyond the testimony of one or both spouses, including any correspondence at the time, statements by a spouse at the time to a friend or family member, and any documents, including but not limited to an “accounting” or other acknowledgment of the agreement done in following years.
As above, the test is whether it would be “significantly unfair” for BC Excluded Property Division by Prior Agreement. As above, spouses often do not discuss things in legalistic terms when they are together, and it is left to counsel to reconstruct what occurred sometimes many years prior. MacLean Law’s award winning high net worth family lawyers would be happy to advise, and make or defend your case regarding BC Excluded Property Division by Prior Agreement.
Book an appointment now as it could prevent you losing hundreds of thousands if not more in your BC Excluded Property Division by Prior Agreement case.
