The Family Law Act of B.C. sets out a regime whereby a spouse can retain the benefit of assets that they either owned prior to the relationship or that they inherited or had gifted to them during the relationship. This is called “excluded property” because it is excluded from property which is to be shared by the spouses.
The “catch” however is that the spouse claiming the excluded property must be able to prove that the excluded property still exists at the date of separation. This is called “tracing.”
Tracing is usually done by providing bank records or other documents that show where the money has been from the date the relationship began to the date of separation.
If the money was used to purchase a home which was registered in both spouses names as joint tenants the exclusion may be lost. This question is currently before the B.C. Court of Appeal.
If the money was spent by one or both of the spouses to pay debts or other expenses the exclusion is lost. Also if the money was invested in an asset which has declined in value the spouse can only claim the value of the excluded property that remains.
The most complicated situation that arises is when one spouse places excluded money in a bank account that contains other funds. The account is then used by the family but the spouse claims that the remaining funds in the account are “excluded.” The other spouse may claim that the excluded funds were spent and the remaining funds are family property.
In any event the onus is on the person claiming excluded property to prove it still exists. If they can’t do this it will be divided equally between the spouses.
Deborah A. Todd