Not All Property Is Split In Divorce: Alberta Matrimonial Property Exemptions

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What are the exemptions of matrimonial property in divorce?

The Matrimonial Property Act (MPA) governs how matrimonial property division occurs upon divorce in Alberta. The Act characterizes certain property as exempt from distribution upon marriage breakdown. “Exempt” means this is an asset which the government has identified as being so personal in nature that you are not expected to share it with your partner. You risk losing matrimonial property exemptions if you treat that property in manner that causes it to lose that status. These general exemption rules also apply to parties who cohabitate.  Learn more about matrimonial property exemptions and how to keep the exempt status in Alberta divorce.

Most Frequent Examples Of Exempt Matrimonial Property

Matrimonial property exemptions protect people from losing assets at the end of a relationship. The following property is exempt from property division in Alberta:

  • Assets that are a gift from a third party;
  • Any assets acquired by inheritance from someone’s estate;
  • Assets owned before the marriage and brought into the marriage or relationship;
  • An award or settlement for damages in tort; or lastly
  • The proceeds received as a result of an insurance policy.

What Value Is Used With Respect To Assets Not Split On Divorce

Couples frequently disagree as to the value of property when dividing assets during divorce or separation. The market value of the exempt property at the time of

marriage, commencement of cohabitation, or the date on which the property was acquired, whichever is later, is the exempt value in Alberta. The market value of the exempt property at the time of marriage or on the date of the property acquisition by the party is exempt. However, the increase in the value of exempt value will be divided by court in a manner that it considers “just and equitable”.

This means that you then divide the increase in value with your partner receiving anywhere from 0% to 50% of the increase in value.  If you keep the asset separate from the family unit and not tied to any efforts of the parties, the payment to your partner is closer to 0% than 50%.

Does Property Remain Exempt Matrimonial Property If Sold?

The exempt property should still exist in its’ original form or be traceable into an asset that currently exists. If you sell any exempt property, it does not necessarily lose its matrimonial property exemption status. However to keep that exempt status, we must be able to trace the sale proceeds into an existing asset. If you lack the ability to track the asset, then you lose the exemption for that property. This means that if you inherent a house (exempt property) and you sell the house, you maintain the status if you use the sale proceeds from the sale of the old home to buy a new home.

Adding Spouses As Joint Owners Of Exempt Property

Adding a spouse as a co-owner or joint owner to exempt property results in you losing part of the exemption. Similarly, people lose the entire exemption completely if they commingle the asset with other property so that it loses its traceability. They also lose the exemption upon the spending of the funds. For example, if they spend it on ongoing living expenses such that the asset no longer exists. Similarly, if the asset or the funds from a third party was a gift to both parties, then no exemption exists. This rule is extremely important! To retain full value of an exemption, the asset must remain exclusively as an asset in the original person’s name or traceable into an account in the sole person’s name.

What Happens If You Put Exempt Matrimonial Property In Joint Names?

Take care with transferring ownership of any property to a spouse. If you put an exempt asset into joint names with your partner or spouse then, as per current Alberta case law, you lose half of the matrimonial property exemptions. The law deems that gifted half of the exempt property to the marriage. The net result is that you retaining 75% of the asset and your spouse receives 25%. Always use caution when transferring ownership like this.

How Marital Contracts Change Division Of Assets On Divorce?

Matrimonial contracts are key to protecting all assets including exemptions. In the absence of a prenuptial agreement, any arrangement or understanding between the couple during their marriage relating to exempt assets will not govern the way court will assess division of your property. This means that if you want to protect assets, you need to have a properly drafted, properly executed and have received independent legal advice for any agreement to be binding. Learn more about all the different types of Matrimonial Contracts here.

Inexpensive Help Protecting Exempt Matrimonial Property

Our team of family lawyers offer consultation services to help clients. The means that they meet with a client for an hour or so. In that meeting, they review possible property the meets these requirements. Next, they give legal advice on how to protect those assets. After the meeting, our clients incur no further costs, unless they require more help.

Help With Protecting Assets From Divorce in Calgary

If  in possession of any exempt assets or anticipate to be in the future, in order to protect yourself. It is smart to have a properly executed cohabitation, prenuptial or post nuptial agreement in place. This then ensures that your separate property remains properly protected. The family law lawyers at Kahane Law Office in Calgary help with your legal needs when it comes to matrimonial property exemptions and protecting assets. Family law agreements have a long term impact. You should have proper legal advice. CALL NOW. We can be in Calgary at 403-225-8810  or email us directly here.