When a marriage or common-law relationship breaks up, a big concern for both parties is how family property will get divided. A common question is whether assets (or liabilities) belonging to either party before becoming spouses is considered family property. The answer is, it depends.
Generally, the law considers all assets and liabilities belonging to the couple on the date they separate family property. That includes what the couple has acquired jointly, or individually by either party. However, there are exceptions.
The Family Property Act
The Family Property Act governs the division of property at the end of a marital or common-law relationship in Manitoba. The Act considers any assets acquired by either of the parties before the date they started living together as pre-acquired property and is not shareable between the parties in the event the relationship breaks down. But there is an exception here too. If the asset was acquired in “specific contemplation” of the common-law relationship or marriage, it would be considered a family asset and therefore a shareable asset.
So, if you purchased a home with the plan of moving into it with your new partner, that home may not be considered a pre-acquired asset should your relationship break up.
On top of that, there is another twist: any appreciation or depreciation in the value of the pre-acquired asset (in our example, a house) is considered shareable. Also, any income earned from the pre-acquired asset is shareable if you kept those funds sitting in an account.
For example, say you owned that house before you started living with your partner and used it as a rental property. Once married, you continued to rent it out. In this case, the home itself is considered pre-acquired, but the rental income during the marriage or common-law relationship is deemed shareable. So too is an increase in the value of the rental home between the date you started living together and the date you separated.
Protecting Pre-Acquired Assets
If you have assets that you acquired before your relationship that you would like to exclude from the accounting of family property, you need to have documentation that shows when you obtained the asset or at least shows that you owned it before the date you started living as a couple.
As part of the family property accounting after separation, there will need to be a determination of an increase or decrease of the pre-acquired item during your union.
Obtaining a statement showing the value of the asset as of the date you and your partner started living together is important. For assets such as a home, an appraisal that is retroactive to the date of cohabitation is possible.
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By Kelly Riediger
Have more questions about family property in the event of separation? Contact me at (204) 992-3249 or [email protected].