Herein lies a cautionary tale as to the continuing effect of the
presumption of advancement upon "Excluded Property" under
the Family Law Act. Individuals who come into a marital
relationship with substantial funds, or who receive inheritances
during their relationship, have no guarantee that these assets will
retain their character as Excluded Property following a breakdown
Section 85(1) of the Family Law Act
("FLA") defines "Excluded Property",
which is exempt from division between spouses after the marriage
breaks down: property acquired prior to the beginning of the
relationship; inheritances; settlements or awards of damages;
insurance policy proceeds; trust property; and property derived
from Excluded Property. However, Section 84(2)(g) provides that any
increase in value of Excluded Property during the relationship is
Three recent cases have given rise to a debate, both among
family lawyers and, apparently, among the judges of B.C.'s
Supreme Court, as to the interpretation of FLA s. 85. The
first, Remmem v. Remmem, 2014 BCSC 1552, considered
whether a husband's inheritance remained Excluded Property
after he used it to purchase property in the names of himself and
his spouse. Justice Butler held that the FLA was a
"complete code" that had extinguished the presumption of
advancement. Justice Butler concluded that the purchase of property
in both names did not alter the nature of the Excluded Property. In
other words, once a spouse brings Excluded Property into the
relationship, its character cannot be changed
regardless of the intention of the parties, either
by transferring it into joint names, or into the name of the other
Remmem was questioned in Wells v. Campbell,
2015 BCSC 3. Justice Matsuhara held that the FLA did not
expressly extinguish the presumption of advancement, or the
possibility of inter vivos gifts between spouses.
Specifically, the definition of "Excluded Property"
includes gifts to a spouse from third parties, but does not include
gifts between spouses. Matsuhara J. concluded that, although the
presumption of advancement had been reduced in its significance, it
had not been extinguished, and that the intention of the gifting
spouse remains a relevant factor in determining the character of
assets transferred between spouses during marriage.
The questions raised by Remmem and Wells were
revisited in V.J.F. v. S.K.W., aka S.K.F., 2015 BCSC 593.
The husband in V.J.F. transferred funds he had received as
a gift from his employer to purchase a home registered solely in
the name of his wife. This was done for creditor protection against
the husband's potential future creditors. At trial, the husband
relied on Remmem for the proposition that the proceeds of
sale of the property derived directly from his Excluded Property.
In the alternative, he argued that if the presumption of
advancement continued to exist, (per Wells and contrary to
Remmem), he had rebutted the presumption because his
intent in registering tile to the property in his wife's name
was solely for creditor protection. The wife argued that to deem
the proceeds of sale to be other than joint property made the title
a sham; that her husband had not rebutted the presumption of
advancement; and that the sale proceeds should be shared equally as
family property. Alternatively, she argued for an unequal division
of the Excluded Property, as to do otherwise would be
Justice Walker had no difficulty finding that the original
assets transferred to the wife were "Excluded Property".
However, by mingling the Excluded Property with family funds in
order to immunize it from potential creditors, the exclusion was
lost because the husband had gifted it to his wife. To say the wife
held the funds in trust would be inconsistent with the purpose of
the transfer. Notably, Walker J. found it compelling that the
husband had notset aside the fundsto apply
to future creditors' claims, but instead had gifted the
funds to his wife to purchase property for the benefit of his
The Excluded Property debate is far from over. V.J.F.
has been appealed. For the time being, spouses who have property
that qualifies as Excluded Property should proceed cautiously when
deciding whether to transfer any portion to their partner.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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It is not uncommon for parents to provide monetary gifts to their adult children. Parents may wish to help their child with a down payment on a property, or help pay out their child's existing mortgage.
On March 31, 2014, BC's new Wills, Estates and Succession Act1 ("WESA") will come into force. WESA introduces new protections for beneficiaries of estates that are in danger of being disputed or deemed ineffective by a court.
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