How to deal with a property in a divorce or separation

image of young Edmonton couple, trying to determine the division of property in a divorce or separationA separation or divorce can be a very emotional time for you. You might not want to think about the division of property in a divorce. But, there may be some lingering questions racing through your head like – “How do I deal with a property in a divorce or separation?”

Well-established Canadian laws are controlling marital property division. They are most likely to be governed by each province. If you have an Edmonton home, then Alberta law would be applicable.

To help you visualize the real impact on a family, we will discuss how the Smith’s, a fictional family in Edmonton, will deal with the division of property in a divorce. We will show how the law deals with various characteristics of their lives. Hopefully, this can help you understand how the law might apply to you if you are dealing with a divorce or separation.

Alberta Divorce Laws

Each province will have its own set of family laws.  The applicable family law that governs property division after a divorce in Alberta is the “Matrimonial Property Act” (MPA). This provides the definitions and overall guidance for property division.

Smith Family Example:

Let us start to consider the case of our fictitious Albertan couple, Mr. and Mrs. Smith.  Perhaps, Mr. Smith is a 40-year-old dentist, and Mrs. Smith is a 38-year-old hairdresser. They have two children: daughter Sarah is 7 years old, and son John is 4 years old.

Mr. Smith owned an Edmonton townhouse before the marriage. He inherited a condo in Devon when his father passed away. As husband and wife, the Smith’s purchased a beautiful home in Leduc, Alberta.

Due to “irreconcilable differences,” the Smith’s have divorced after 9 years of marriage. How should their property be divided? Is all the property available to each spouse?

Matrimonial Property Act

Under the Matrimonial Property Act, the definition of “matrimonial home” includes a property owned or leased by one or both spouses. In most cases, its the family home. It is a self-contained dwelling unit that could consist of a house, mobile home, condominium, or another type of property.

There are many stated goals of the Alberta government in dividing up the matrimonial property. One standard is to distribute property “equally between the [two] spouses.” While this is an excellent concept, specific factors might make this goal difficult to attain. Why?

Where will the children live? Some properties are considered to be “individual,” and some are “matrimonial.” There is also the issue of market value.

The government can consider whether a spouse has other accommodations. The financial position of the spouse can also be considered. The government does not want to leave either party destitute or homeless.

Smith Family Example:

Under the Matrimonial Property Act MPA Part 3, 31 “Disclosure of Property By Spouses,” both Mr. and Smith will be required to list all of their property. Of course, this includes bank accounts, retirement accounts and so forth, along with their real estate.

Under the MPA Part 3, 34 “Prevention of Gift or Sale,” the courts can prevent the sale of a matrimonial home if said sale defeats a claim made by the other spouse. Under the MPA Part 3, 37 “Agreements Between Spouses,” a separation agreement can include information related to the division of property.

A legally valid property division agreement must include an Acknowledgement that both parties understand what was contained therein. Both must assert that they made the agreement of their own free will. Both Mr. Smith and Mrs. Smith must sign it.

Division of Property in a Divorce

What is the legal difference between separate and marital property? This can be one of the problematic concepts after many years of marriage. Previously, everything was shared, but which property belongs to the individual and which property belongs to both spouses?

Smith Family Example:

Mr. and Mrs. Smith have three properties for consideration:

  • Edmonton townhouse
  • Devon condo
  • Leduc family home

Which of these would be categorized as “individual” and which would be categorized as “matrimonial” property?

Individual property is exempt in a separation

image or a home in the owners hands, symbolizing a property that was owned separately and is exempt from the division of property in a divorceThe separate individual property consists of that which was owned by either spouse before the marriage. It might also be included in an inheritance by either spouse (it does not matter if the inheritance was before or after the wedding). A gift to one spouse or the other is explicitly exempt. An insurance payment from a lawsuit might also be part of the individual property.

By exempt, it means the court cannot divide it as common property. It belongs to one party or the other, exclusively.

The co-mingled separate property might be re-classified as marital property.

Judges will differ on whether property owned before the marriage can be categorized as individual or matrimonial. Generally, if the property usage was for the entire family, then it might become marital property. The division of property in divorce focuses on marital property.

Smith Family Example:

As we know, Mr. Smith owned an Edmonton townhouse before the marriage, and if the family used this as a vacation property, it might be considered a second home. This would be a co-mingled property where the individual category changed to matrimonial by usage. Mr. Smith’s inheritance of the Devon condo from his father would be listed under the separate individual property category.

Marital Property Rights

Under the law, most of the property acquired during the marriage can be considered marital property. The concept is that both spouses worked towards the purchase of the said house, condominium, mobile home, or townhouse. They also were involved in the upkeep, maintenance, and usage of said family homes.

Another issue is the appreciation of real estate. In general, the market value of the property is what is considered by the court. Both spouses can estimate the property values or hire real estate appraisers to do the job.

Furthermore, increases in property value are also considered to be marital property. There is also a concept called “passive appreciation” and “active appreciation” in Canadian law. What does this mean? We shall use our Smith family example to help you understand.

Smith Family Example:

First of all, the Leduc family home would be considered matrimonial property. Since the Edmonton townhouse was shared, it might also be considered a co-mingled matrimonial property.

Passive appreciation is when the market increases the value of your property after you made no home improvements. Demand might be high for Edmonton property.

When a home equity line of credit (HELOC) was used to upgrade the bathroom or add a deck, then this might be an excellent example of active appreciation. Mrs. Smith might have hung drapes and painted the bathroom in the Edmonton townhouse. Mr. Smith might have installed a new set of cabinets in the Leduc family home. Both assisted with the active appreciation of their properties.

Amicable Divorce

photo of young boy, the child of a separating couple in Edmonton, moved into a new home with one of his parents, enjoying his new bedroomThe court is supposed to take into consideration your marriage length, income, each spouse’s contributions, a standard of living, age, health and education when dividing up the property. The judges know the law, but you know your family situation.  That is why many people to try to create their own separation agreement dividing up the property.

This saves you court fees and stress. You can do what is best for your children. You can make sure that both spouses are well taken care of.

You can’t cut a house down the middle.

Realistically, you can’t divide one family home. You could sell the house and share the money, but where would your children live? Therefore, you need to find the best accommodation with your ex-spouse.

If you need help with the division of property in a divorce, then you can contact the Law Society of Alberta or one of our Edmonton mortgage brokers at Advantage Mortgage.  We can help you determine how to proceed with financing options available and properties to fit your needs.

Smith Family Example:

It would behoove Mr. and Mrs. Smith to sign a legal separation agreement that divides their property equitably. They would ensure that the children had a safe place to stay. They might also want to contact an Edmonton mortgage broker to help them with their changed housing status.

Working together to make the painful process flow more smoothly is beneficial to both parties, especially when a property is involved. You don’t want to damage the property value due to emotional acrimony.

No matter what your situation is, we are here to help with your property needs. As an Edmonton mortgage broker, we can provide you with the answers to your most pressing questions on how to handle the division of property in a divorce or separation.  You’ll learn about the programs available for spouse and business partner separation that allows refinancing up to 95% of the property value.

Divorce and separation can be complicated, but with your property rights, you can make the best go of your new life.