Dividing The Increase In Value Of Matrimonial Property That Is Not Shareable

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Increased Value Division Of Exempt Matrimonial Property is locked
Increased Value Division Of Exempt Matrimonial Property

Alberta law exempts certain matrimonial property from equal distribution at the end of a marriage. While the asset, for example a home, investment or company, likely maintains exempt status, the question turns to any increase in value of that property. The increased value division follows its own set of rules as set out below. If you have questions, never hesitate to set up a consultation at Kahane Law Office in Calgary. We help clients understand their legal position, in the event of a breakdown in their marriage.

The Law On Division Of Matrimonial Property

In Alberta, the Matrimonial Property Act R.S.A. 2000, c.M-8 (MPA), governs the characterization, determination, and division of matrimonial assets.  The MPA speaks to property issues arising from separations, the possession of the matrimonial home, and the possession of matrimonial property. It also deals with increased value division of assets. The law divides matrimonial assets into three categories for division.

Equally Split (50/50) Property Division

Most property acquired during a marriage is split equally. Section 7(4) of the MPA deals with the property divided on a 50/50 basis. Essentially this is a catch all category. Unless you can categorize an asset/value of an asset as falling under one of the two categories below, then property is divided equally between spouses.

Exempt Matrimonial Property

Section 7(2) sets out exempt matrimonial property. This is property that is not sharable at the end of a marriage. Learn more about exempt matrimonial property under Alberta law here. The categories are specific and finite.They include:

    1. Gifts from third parties;
    2. Inheritances;
    3. Insurance received from an injury; and
    4. Property owned prior to the marriage.

Just And Equitable Division Of Matrimonial Property

Lastly, Section 7(3) sets out property to be divided on a “just and equitable basis”. This is divisible property which the courts divide on a just and equitable basis, after taking into account the factors set out in section 8 of the Matrimonial Property Act. For example, these factors include:

      1. The increase in value of exempt property;
      2. Proceeds from exempt property;
      3. Property acquired as a gift from the other party;
      4. Property purchased from exempt property or its proceeds; and lastly
      5. Property acquired subsequent to a divorce.

The Courts Discretion With Increased Value Division

In general the courts presume an equal division of matrimonial property when the marriage ends, subject to the exceptions listed above.  The court maintains considerable discretion with respect to section 7(3) property, or property to be divided on a just and equitable basis, and some discretion with respect to section 7(4) property.

For example, the property that you acquired prior to your marriage is exempt from distribution, provided that it still exists or can be traced to an existing asset. However, the increase in value of that property is subject to Section 7(3) of the MPA. It is up to the person claiming the exemption to prove the value of exempt property at the time of their marriage, or when they acquired it, or if acquired during the marriage, such as an inheritance.

Factors The Courts Use In Determining Increased Value Division Of Exempt Property

If you owned property before marriage or if you received an inheritance, (or any property that falls within the “exempt property” categories) and the property increased in value, the law outlines the manner a court exercises its discretion when deciding how to divide the increase in value of otherwise exempt property by outlining the factors which the court must be given due consideration in its Section 8:

  1. Contribution of each spouse to the family;
  2. Contribution of each spouse to the family farm, enterprise or business;
  3. Direct or in-direct contribution to the acquisition or improvement, operation, management, or conservation of the family farm, enterprise or business;
  4. Financial obligations and income earned at the time of marriage and time of trial;
  5. duration of the marriage;
  6. whether property acquired when the parties were living separate and apart;
  7. Written or oral agreements between the parties;
  8. Gifts or transfer of matrimonial property other than to a purchaser for value;
  9. Previous distribution of property between the parties;
  10. Prior court orders;
  11. Potential tax liabilities incurred as a result of the transfer or sale of property;
  12. Dissipation of Property
  13. Any fact or circumstance which is relevant.

Case Law Supporting Equal Division Of Increased Value

Our court of appeal dealt with the question of how to divide an unequal division of matrimonial property in the case of Mazurenko v. Mazurenko [1981] 124 A.L.R. (3rd) 406 (Alta. C.A.), and in deciding how to distribute a family farm, the court’s focused only on whether or not the farm had been “brought into the matrimonial regime”.  Since both spouses contributed substantially to the family farm, which became a family business, the court decided to allow for an equal distribution of the increase in value of the same.

Looking At What Caused The Increase In Value

The courts will also take a close look as to why the property in question increased in value. This is key to determining increased value division. Generally, when the increase in value is a result of the parties’ mutual efforts, the courts’ inclination is to have the parties share in this value, but it may not always be split 50/50.

Increased Value Due Primarily To Increase In Market Values

In the case of Sparrow v. Sparrow [2006] A.J. No. 513  (Alta C.A), our court of appeal refused to allow the equal distribution of the value of a property that had increased from $160,000 to $1,055,000, from the date of marriage to the date of trial.  The parties marriage lasted for 14 years and resulted in a family including four children. Because market forces alone increased the value of the property, the court of appeal only awarded the non-owner spouse 25% of the increase in value.

Increased Value Due To Exempt Property’s Owner’s Own Work

In Oddan v. Oddan [2005]A.J. No 1579 (Alta. Q.B.)  Justice Martin dealt with a 20 yr. marriage where the wife had acquired, preserved and been primarily responsible for the family farm.  The court found that the contributions of the wife had been far greater than the contributions of the husband as she had made all significant decisions and accepted all financial responsibilities.    Nevertheless, the husband had done some work on the farm, and contributed, albeit sporadically, to the farm’s finances. The Court awarded the husband 30% of the increase in value (the farm had been worth $800,000 at marriage and $1.675 million at trial).

Market Increase In Situation Of A Long Marriage

Similarly, in the case of Mellette v. Robertson [2004] A.J. No. 1044 (Alta Q.B.) Justice Martin allowed a husband to have $350,000 of the 1.3 million dollar increase in the value of exempt gifted property.  In this case, neither party contributed to the  increase in the value of the property (shares in a company). However, the justice noted that in light of the length of the marriage (30 years), the disparity between the parties’ would be enormous if the husband was not allowed to share in the increase.  Ultimately, the court allowed the husband to share in the increase in value because it was just and equitable to do so.

Key Factor Summary In Exempt Property Increased Value Division

In short, in deciding how to divide the increase in value of your ranching operation, a court will have to rely heavily on evidence regarding the contributions that both you and/or your spouse made to property.

Hiring Family Law Lawyers For The Division Of Matrimonial Assets

The family law lawyers at Kahane Law Office assist you to explore your rights, obligations, the options available to you, and how to best present your case. Before you negotiate anything, know your rights. We want to help. Please reach us locally in Calgary at 403-225-8810 (toll-free at 1-877-225-8817), or email us directly here.