The Importance of Separation Dates

It may be surprising to find out that parties do not have to agree that they are separating for separation to occur. In other words, if you decide to separate from your spouse, you do not need their permission.

In order to establish that a separation has occurred, one spouse must communicate their intention to separate to the other spouse and then act on that intention. For example, telling your spouse that the relationship is over and then performing actions that make that intention clear, such as moving into a separate bedroom, no longer sharing meals together or removing engagement or wedding rings. If possible, clearly inform the other spouse of your intention to separate in writing. A text message or email can help establish a paper trail in the event the separation date is at issue in future.

It is important to note that spouses may be separated while continuing to live together. Contrary to popular belief, one spouse does not need to move out of the family residence for separation to occur.

Establishing a clear separation date is incredibly important, especially for spouses that are not married and are instead in a marriage-like relationship. Pursuant to section 198 of the Family Law Act, spouses who were living in a marriage-like relationship may start a proceeding for an order related to property division, pension division or spousal support, no later than 2 years after the date the spouses separated.

Consequently, if a claim is not commenced during this period, your ability to make a claim against the other spouse for property division, pension division and spousal support may be extinguished.

Determining the separation date can be further complicated by the fact that the Family Law Act stipulates that for the purposes of determining family property and family debt, spouses are not considered separated if, within one year after separation the spouses begin to live together again and the primary purpose of doing so is to reconcile and they continue to live together for one or more periods, totaling at least 90 days.

If you are considering separating from your spouse, please seek legal advice to ensure that your separation date is clearly established to help minimize possible issues going forward.

Nothing contained herein this post constitutes legal advice. We are not your lawyers, but we could be. Join our waitlist to be contacted for a legal consultation. We endeavour to reply within 24-48 hours.

Income Imputation in BC Family Law

The income of the spouses involved in a family law matter is often a highly contested issue and rightfully so. Income plays a central role in determining the dollar amount of child and spousal support, as well as the proportion that each party is required to contribute to section 7 expenses, or what is also known as special and extraordinary expenses.

The starting point for determining income is to review line 15000 of the spouse’s T1 Income Tax and Benefit Return. However, this can quickly become complicated and inadequate in situations where line 15000 does not accurately reflect a spouse’s income. There are many circumstances where this could be the case. A common example is when a spouse is self-employed. In situations where a spouse is self-employed, there are often expenses deducted to lower the total amount of income for tax purposes. However not all expenses are acceptable deductions in the context of child support and may need to be added back to the spouse’s total income to accurately reflect income for child support purposes.

If there is a concern that a spouse’s income is not being accurately reflected in that spouse’s financial disclosure, or a spouse fails to make necessary financial disclosure, a court may set that spouse’s income at a specific amount and the court will either “attribute” or “impute” income to a spouse.

Section 19 of the Federal Child Support Guidelines lists a number of circumstances where a court may “impute” or “attribute” income:

• where a spouse is intentionally unemployed or underemployment, other than when required by the needs of a child of the marriage or any child under the age of majority or by the reasonable educational or health needs of the spouse;

• the spouse is exempt from paying federal or provincial income tax;

• the spouse lives in a country that has effective rates of income tax that are significantly lower than those in Canada;

• it appears that income has been diverted which would affect the level of child support to be determined under these Guidelines;

• the spouse’s property is not reasonably utilized to generate income;

• the spouse has failed to provide income information when under a legal obligation to do so;

• the spouse unreasonably deducts expenses from income;

• the spouse derives a significant portion of income from dividends, capital gains or other sources that are taxed at a lower rate than employment or business income or that are exempt from tax; and

• the spouse is a beneficiary under a trust and is or will be in receipt of income or other benefits from the trust.

If one or more of the circumstances listed above exist and the parties to a family law matter are unable to agree on income for the purposes of support or special and extraordinary expenses, it may be necessary to seek an order from the court.

What if my Spouse is Intentionally Underemployed or Unemployed?

A common scenario that arises in the context of family law is a concern that a spouse is intentionally unemployed or underemployment. This issue arises in situations including, but not limited to, where a spouse is employed on a part-time basis, where a spouse transitions to a new role with reduced pay, where a spouse is unemployed entirely or where a spouse retires early.

The Court of Appeal in Marquez v. Zapiola, 2013 BCCA 433, noted when intentional unemployment and underemployment is at issue, the legal test for imputing income is one of reasonableness, taking into consideration the parties’ capacity to earn income in light of their age, education, health, work history and work availability. A spouse’s capacity to earn income will include that person’s ability to work or to be trained to work.

It is important to note that the court not only considers the income the spouse is earning but also the amount of income a spouse could earn if working to capacity - Windle v. Windle, 2010 BCSC 18. Therefore, if a spouse is earning $60,000 but is found to have the capacity to earn $90,000, a court may impute the spouse’s income accordingly. These decisions can have a significant impact on the amount of support payable.

Income imputation is complex and can have a significant impact on the amount of support you receive or are obligated to pay. Please seek legal advice to ensure the specific facts and circumstances of your case are addressed accordingly.

Nothing contained herein this post constitutes legal advice. We are not your lawyers, but we could be. Sign up for our waitlist - you will be contacted in 24-48 hours.

What’s Mine is Yours? What’s Yours is Mine?

Property division post-separation can be daunting but ultimately depends on how the property is characterized.

The categories are as follows:

1. Family property

2. Excluded property

3. Separate property

Family Property

Family property includes property that was acquired during a marriage or marriage-like relationship and that is owned by at least one spouse at the date of separation. This can include bank accounts, homes, vehicles, and RRSPs among other items of property.

One common misconception is that property held in only one spouse’s name is not family property. In BC, family property is not determined by who holds legal 'named' title to that property. For example, if only one spouse is on title to the family residence, the family residence is still considered family property. This example also applies to vehicles registered in only one spouse’s name.

The Family Law Act stipulates that upon separation, each spouse has a right to an undivided half interest in all family property, meaning that as a starting point, each spouse is entitled to an equal (50/50) share in all family property. If unequal division of family property is sought by way of court order, that spouse seeking unequal division needs to prove that equal division is significantly unfair. This is a legal term with a long history of caselaw interpretations to determine what actions and circumstances reach the threshold of significant unfairness.

It is important to note that parties can suggest and mandate unequal division of family property by way of agreement if the parties are able to resolve their issues outside of court (or in advance of separation by way of a cohabitation or marriage agreement).

Excluded Property

There are circumstances where property owned by one spouse upon separation is not family property and instead falls within the definition of excluded property. Excluded property includes but is not limited to the following:

1. Property owned by one spouse prior to the start of the marriage or marriage-like relationship.

2. Gifts to one spouse from a third party. For example, a gift to one spouse from a friend or parent.

3. Inheritances to one spouse.

Unlike family property, excluded property is not subject to equal division upon separation. However, it is still subject to a degree of division. For excluded property, the increase in value of the excluded property from the date of the marriage or marriage-like relationship to the date of separation is divisible. For example, if a spouse owned a home that was valued at $500,000 prior to the marriage or marriage-like relationship and upon separation that value skyrocketed to $1,500,000, the increase in value totaling $1,000,000 is divisible. Given the historical rise in BC home values, the value of an increase in excluded property can be significant.

Separate Property

Separate property is property purchased post-separation and is not divisible. However, it is important to note that if separate property was derived from family property or is a result of the disposal of family property, it remains subject to division. For example, a spouse cannot sell family property post separation and purchase additional property with the proceeds in attempt to avoid division.

Property division is a common yet complex area of family law. Please seek legal advice related to your rights and possible entitlements regarding property division.

Nothing contained herein this post constitutes legal advice. We are not your lawyers, but we could be. Sign up for our waitlist - you will be contacted in 24-48 hours.