Evaluating property division after separation and understanding the distribution of assets and liabilities when a couple separates is one of the most stressful aspects of a relationship breakdown. In Alberta, the Family Property Act dictates how assets and debts are divided after separation.
How Property is Divided
When a marriage or adult interdependent/common law relationship ends, the starting point for property division is typically an equal split of all family property. This includes assets acquired during the relationship, such as the family home, vehicles, and household goods.
However, exemptions often apply to property brought into the relationship, inheritances, and particular aspects of personal injury settlements, though any increase in the value of those exempt assets during the partnership may still be subject to division.
What Happens to the Family Home?
For many Albertans, the primary residence is their most significant asset. There are generally three ways to handle the home:
- Buy-out: One partner purchases the other’s interest in the home, which may require a mortgage refinance to remove the other spouse from the title and the debt.
- Sale and Division: The property is sold on the open market, and the net proceeds are divided in accordance with the Family Property Act, after paying off the mortgage, any other encumbrances and real estate fees.
- Deferred Sale: In some cases, usually those involving children, partners may agree to delay the sale of the home for a specific period of time. This can be complicated and it is critical this is dealt with in the Separation Agreement so that both parties are protected.
Dividing Pensions and Retirement Savings
Pensions and RRSPs are considered family property and are subject to division based on the value accumulated during the years of the relationship. Funds can often be transferred from one partner’s retirement account to the other’s via a tax-deferred rollover, ensuring neither party is unfairly penalized by the CRA at the time of separation. Most Pension Administrators require specific language in a Separation Agreement or Court Order so it is imperative the documents are drafted carefully, with the assistance of legal counsel.
Managing Shared Debts
Property division isn’t just about assets; it’s also about liabilities. Debts such as mortgages, lines of credit, and credit card balances incurred during the relationship are generally shared. It’s important to note that while a private agreement might assign a debt to one person, creditors may still hold both parties liable if the debt is in both names. Legal intervention is often necessary to ensure that debt obligations are formally restructured.
Navigating the Legal Process
The goal of the Family Property Act is to ensure just and equitable outcomes. Because every family’s financial footprint is unique and may involve varying tax implications and valuation dates, relying on a generic formula can lead to costly oversights. Proper disclosure is the bedrock of this process; both parties must provide a full and honest accounting of their financial standing to reach a binding agreement.
Secure Your Financial Future After Separation
Navigating the complexities of the law requires a strategic approach to protect your interests and your future. If you’re concerned about your rights regarding assets or debt, we’re here to provide the clarity you need.
Contact BDL Family Law today to obtain a fair property division with our experienced lawyers.
Disclaimer: Blog posts from BDL Family Law are for informational purposes only and are not intended to constitute legal advice.
