The law is still evolving in regard to whether a spouse’s right to excluded property is lost if the property is gifted to the other spouse.
An example of this is if one spouse owns a house when the spouses start living together and that house is sold and the spouses use the proceeds of the sale to purchase a new house which is placed in joint names, does one spouse get to claim the money he or she received from the first house as their excluded property?
There have been three B.C. Supreme Court decisions on this to date.
The first decision Remmem v. Remmem, 2014 BCSC 1552 said that the claim to excluded property is preserved.
The second decision Wells v. Campbell, 2015 BCSC 3 states that the exclusion would be lost.
The third and most recent decision V.J.F. v. S.K.W., 2015 BCSC 593 (April 16, 2015) agrees with Wells v. Campbell and says that the common law presumption of advancement is still alive and well and you have to try to determine the intention of the donor spouse if you want to preserve the exclusion. Did the donor spouse seek to retain any beneficial interest in the property or was it their intention to gift it to the other spouse?
Even if an intention to retain a beneficial interest is proved, the result can be overturned if it is “significantly unfair.” Section 96(b) of the Family Law Act1 states:
96 The Supreme Court must not order a division of excluded property unless
(a) family property or family debt located outside British Columbia cannot practically be divided, or
(b) it would be significantly unfair not to divide excluded property on consideration of
(i) the duration of the relationship between the spouses, and
(ii) a spouse’s direct contribution to the preservation, maintenance, improvement, operation or management of excluded property.
The unfortunate result of this is that we no longer have a simplified regime where one spouse can retain the property they bring into the relationship if that property is gifted to the other spouse.
1Family Law Act, [SBC 2011] CHAPTER 25