Someone once described marriage as “what is hers is hers and what is yours is half hers.”
Perhaps an accurate description of marriage, however, not so accurate about property division upon the dissolution of marriage.
Clients often come in with misconceptions of how property will be divided. Property division in Alberta is governed by the Matrimonial Property Act (MPA). This is provincial legislation. The divorce, child support, spousal support and access are governed by the Divorce Act which is federal legislation.
The general rule is that all-non exempt property acquired during the marriage is to be divided equally between the spouses and that the value of the property is to valued at the date of trial. A majority of matters do not go to trial. In fact, in matters are resolved by way of alternative dispute resolution (i.e. four-way meetings, mediation & arbitration) often times the date of separation is used as the date of division.
Confused yet? Don’t worry it gets worse.
The equal distribution of property mentioned above is presumptive. Meaning that in some situations, where it is not just and equitable to do so, the court may make an award for an unequal division of matrimonial property. To that end, section 8 of the MPA gives a number of factors to be taken into account when looking at division of matrimonial property. Those factors include:
- Contribution made by each spouse to the marriage & the welfare of the family including as a homemaker or parent;
- Contribution, financial or otherwise, made directly or indirectly to the acquisition, conservation, improvement or management of a business owned or operated by either spouse or the family unit;
- The income, earning capacity, liabilities, obligations, property and other financial resources that each spouse had at the time of marriage & at the time of trial;
- Duration of the marriage;
- When was the property acquired;
- Any agreements between the parties;
Some additional factors exists, and then section 8 has a catch all provision that allows the court to consider “any fact or circumstance that is relevant.”
In Hodgson v. Hodgson 2005 ABCA 13, the Alberta Court of Appeal outlined the steps that should be taken by a court when dividing property:
The first step is to determine all property owned at date of trial.
The trial judge then moves on to the second step which is to discern the property that is exempt from distribution under section 7(2), or that can be traced to section 7(2) property. The value of that property, as at date of acquisition, or date of marriage, is then excluded from distribution. This exemption is understandable when one considers the types of property included in section 7(2). These assets, generally, are not connected to the marriage.
The third step requires the trial judge to determine what property falls under section 7(3). This includes the increase in the value of exempt property, from the date of acquisition or marriage, to the date of trial. That property is then distributed between the parties in a manner that is just and equitable. No statutory presumption of equality exists with respect to this property, and the trial judge’s discretion is exercised by taking the section 8 factors into consideration. Over the years, jurisprudence has developed to assist judges in the exercise of that discretion. For instance, where a gift, inheritance, or other section 7(2) property is acquired after separation, Mazurenko provides that any increase in the value of that property is also exempt. In addition, Mazurenko suggests that where exempt property, or a portion of otherwise exempt property, is brought into the marriage it may attract the presumption of equality
The steps enunciated by the Court of Appeal in Hodgson continue to be applied today by the courts in property division issues. Most of the time property issues, once all of the facts regarding the property are out in the open, are dealt with easier than issues of custody, access and support. Proceeding to an agreement without full disclosure of financial assets and liabilities ought to be done at your peril. Even more frustrating is when parties want to deal with the matrimonial assets and not the debts. For example, often times the parties will want to have the matrimonial home listed for sale immediately and then divide the proceeds without considering about the mountains of consumer debt that was acquired during the marriage.
Better off to deal with everything, assets & debts, all at once. If you do not, one of you will most often get the short end of the stick.