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An Update on Joint Tenancy and Confusion Regarding Excluded Property under the Family Law Act

We have previously written about excluded property and then about emerging confusion regarding Excluded Property under the Family Law Act. As a general principle a spouse who brings an asset into a relationship is entitled to keep the value of that asset when they brought it into the relationship. We call this "excluded property" because it is excluded from the usual 50/50 division. The question is what happens if they made their spouse a joint owner of that property.

The Excluded Property Cases

When we previously wrote about it, there were conflicting cases.  The Court of Appeal has since weighed in on the issue, and in doing so they have provided some clarity, but also some further confusion. In V.J.F. v. S.K.W., 2016 BCCA 186 the Court of Appeal considered a situation in which the husband had a $2 million property that he brought into the relationship. He transferred the property entirely into the name of his wife in order to keep it safe from future creditors or legal liability. He argued at trial that the whole property should be his alone because he brought it into the relationship. The trial judge disagreed and divided the property in half. The Court of Appeal decided that was the correct result.

The Confusion

This has made it clear that if you give the entirety of an asset that you brought into the relationship to your spouse, that asset is not excluded any more. The tricky thing is that while the Court of Appeal discussed the cases we mentioned in our previous post in coming to their decision, the problem we discussed is not actually the exact same as what they ruled on. In VFJ, the Court of Appeal found that the whole property was gifted to the wife and that defeated the whole exclusion. In Wells, a case we discussed in our previous post, the judge found that when the husband gave half of the property to the wife, he defeated the whole exclusion. Unfortunately the Court of Appeal did not address that difference. In my view the law should be interpreted that your exclusion in a piece of property continues to exist when you add a spouse as a joint tenant as long as the exclusion is for less than half of the total value. However, only time will tell if that is the view that the courts will adopt, and in the meantime it would be prudent to seek a lawyer's advice before putting any property in your spouse's name.

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