April 14, 2021
Vancouver & North Vancouver family lawyer discusses how to lose your excluded property
In a previous blog post, I discussed the ways that a spouse may lose their excluded property resulting in them having to share that property with their ex-spouse if they separate. A common way for a spouse to lose their excluded property is to transfer the excluded property into joint names.
For example, you may lose your excluded property by transferring it into real estate jointly held with your spouse (that is, property owned in “joint tenancy”); a bank account jointly owned with your spouse; a vehicle joint registered in your name with your spouse, or other property which is jointly owned.
As I have previously discussed, there are eight categories of excluded property listed in the Family Law Act. Some common types of excluded property are:
- Property owned by a spouse prior to the spousal relationship. For example, your equity in the family home that you owned prior to becoming spouses.
- Gifts to one spouse from a third party. For example, a gift from your parent to you for the down payment of real estate.
- Inheritances received by one spouse. For example, your grandmother passes and leaves you a cash inheritance.
- Personal injury settlements and insurance settlements (not attributed to the loss of income).
In the recent BC Supreme Court case of Basi v Basi, 2021 BCSC 421, the court confirmed that if a spouse transfers excluded property into joint names, but does not take steps at the time of the transfer to ensure that their excluded property will be returned to them at separation, and the court cannot otherwise find evidence of an intention to keep the excluded property separate, the excluded property will be lost and shared with the other spouse. For example, if there is evidence that the spouses at the time of transfer were “coming together” with the intention of commonly owning property, and they do not discuss what will happen if they break up, the excluded property will likely be lost.
If, however, a court can find evidence that a spouse did not intend to make a gift, then the transferring spouse may be able to keep his excluded property. Such evidence may include, for example, an oral agreement between the spouses that the excluded property would be returned upon separation, or some other circumstantial evidence of intention to keep the property separate.
In Basi v. Basi the parties began cohabiting in May 2005, were married in May 2007 and separated in July 2016. When the parties met in 2004 Ms. Basi was living in a rental suite and Mr. Basi was living in a house he co-owned with his mother (the “First House”).
On September 1, 2006, the parties began living together in a home they purchased together in June 2006 (the “Second Hose”).
The parties separated on July 13, 2016, and at that time owned a property (the “Third House”). Mr. Basi, amongst other claims, claimed $207,930 of his excluded property was used to purchase the Second House. Specifically, a $10,000 deposit that was paid towards the purchase of the Second House (which Mr. Basi said was derived from a line of credit secured against the First House) and $197,930.27 from the sale proceeds of the First House that was used as the down payment for the Second House.
It should be noted that in 2006 Ms. Basi received approximately $101,000 as her share of the family assets from her previous marriage.
Mr. Basi says the parties agreed he would provide the funds to purchase the Second House, and that Ms. Basi would provide her $101,000 as a contribution towards future household expenses, and not towards the acquisition of the Second House. Ms. Basi stated that she provided her $101,000 to Mr. Basi as her contribution to the purchase of the Second House, being half of the approximately $200,000 the parties put towards its purchase.
The court’s finding
After considering all of the evidence, the court found that Mr. Basi lost his exclusion for the following reasons:
During his testimony, Mr. Basi described the purchase of the Second House as the parties’ “coming together” to buy something after both the First House and Ms. Basi’s former family residence had been sold. Such a description was inconsistent with the suggestion that Ms. Basi made no contribution towards the purchase of the Second House.
(1) The parties took title to the Second House as joint tenants, evidencing their intention to jointly purchase the property.
(2) The parties had no discussions about how their respective financial contributions would be treated or about what would happen to their family property upon the breakdown of the relationship until the year leading up to their separation.
(3) Over the course of their relationship, the parties worked jointly to improve first the First House, then the Second House, and finally the Third House. Each contributed what they were able towards the household expenses. They equally took on the debt associated with both the Second House and the Third House.
(4) At the time the Second House was purchased, there was no acknowledgment by Ms. Basi that Mr. Basi’s contribution was to remain his exclusive property.
So, what’s the takeaway?
If you have excluded property that you do not want to share with your spouse if you separate, the safest thing to do is to keep it in your sole name. However, if you do decide to place excluded property into joint names with your spouse, make sure you document an express intention to keep the excluded property separate in the event you separate. My recommendation is that you enter into a marriage or cohabitation agreement (also known as a “prenuptial agreement”) which clearly states you and your spouse’s intentions with respect to excluded property. You can learn more about marriage or cohabitation agreements (also known as a “prenuptial agreement”) here and you can contact me here to book your free consultation.
NOT LEGAL ADVICE. Information made available on this website is for information purposes only and is not legal advice. Do not rely on this information, nor take or fail to take any action, based upon this information. Do not disregard professional legal advice or delay in seeking legal advice because of something you have read on this website. Contact me here to discuss any specific legal issues.