Excluded Property and family property 

 

If excluded property exists in a case, the factual analysis is even more critical and sometimes leads to significant amounts of new found money on division of assets due to subtle facts and law in recent cases. Recent cases have had significant financial implications resulting in unexpected gains or losses to the parties.

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The following summary of excluded property rules is taken from the case Chapman 2020 BCSC 1029 and refers to the main rules.

 

1. Property that is excluded from family property includes property acquired before the relationship began. It includes inheritances, gifts from third parties, and property derived from excluded property: FLA, s. 85(1). Most importantly, the growth (increase) in value of excluded property during the marriage is considered family property: FLA, s. 84(2)(g). 

 

2. A spouse who advances a claim that property is excluded property is responsible for demonstrating, on a balance of probabilities, the basis for and extent of the exclusion, based on “clear and cogent evidence”: FLA, s. 85(2); Shih v. Shih, 2017 BCCA 37 at para. 43.

 

3. However, in balancing the evidence as a whole, a trial judge is permitted to draw reasonable inferences from evidence that is less than certain or precise in order to do justice between the parties: Shih at para. 44.  

 

4. To establish an exclusion a party must prove the value of the exclusion and, if property is derived from that exclusion, that the exclusion can be traced into property that existed at the date of separation: FLA, s. 85(1)(g).

 

5. Where a spouse seeks to have any increase in the value of the excluded property included in family property, however, they have the onus of establishing the value of the increase: J.S.F. v. W.W.F, 2015 BCSC 2375 at para. 161; Kumagai v. Campbell Estate, 2016 BCSC 450 at para. 70, reviewed on other grounds 2018 BCCA 24.

 

6. The approach involves first determining the net fair market value of the property at the time the spouses’ relationship began or the time it was otherwise acquired, followed by a determination of its fair market value at the date of trial, and subtracting the former from the latter: S.L.M.W. v. M.R.G.W., 2016 BCSC 272 at paras. 69–71. 

 

7. When one spouse has excluded property that is real property, the other spouse has a monetary claim and entitlement to an undivided half interest in the increased value of the property and not an undivided half interest in a real estate asset itself: Johnson v. Korol, 2019 BCSC 111 at paras. 45-46, possibly affecting the validity of a CPL filed on the title.

 

8. The division of excluded property located outside British Columbia triggers even more complex analysis.

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