Matrimonial Property Exemptions during Divorce in Alberta

Alberta’s Matrimonial Property Act (MPA), governing how property is divided upon divorce, defines several assets as exempt from distribution. Assets are exempt if they are so personal that the government does not expect you to share them with your partner. Any time you deprive yourself of an exempt asset, you risk forfeiting its exempt status.  This article provides information about the general exemptions and how to keep your assets exempt in an Alberta divorce.

Assets Commonly Under Exempt Matrimonial Property

Certain property is exempt in Alberta from the property division process. These assets include assets given to you by a third party, assets inherited from someone else’s estate, assets brought into the marriage or relationship that were owned before marriage by either partner, and damages resulting from a tort claim (such as a car accident), or insurance payouts.

What Value Is Used in Such Assets?

Couples often disagree on how to value property when they are dividing assets. In Alberta, the following rules apply: In the event of a divorce, the market value of the exempt property at the time of marriage or at the time of commencement of cohabitation, whichever is later, is the exempt value. Market value refers to the value at the time of marriage or when a party acquired an asset, whichever is later.  If an asset increases in value while you are married or cohabiting, your spouse may receive anywhere from zero to 50 per cent of the increase in value. If you keep the asset separate from your community property and it does not benefit from any community effort on your part, you will pay less if it is increased in value.

Does Matrimonial Property Exemption Apply to Sold Property?

Property considered exempt should still exist, or you should be able to trace the original proceeds into an existing asset. The property won’t lose its exempt status if you sell it and use the proceeds to buy another exempted asset. For example: When you sell a house, you can maintain the exemption status if you use the sale proceeds to buy a new home.

Putting Exempt Matrimonial Property Exemptions in Joint Names

Transferring ownership of any property to your spouse is not considered an eligible asset for the matrimonial property regime. This means that, under current Alberta case law, if you put any exempt assets into joint names with your partner or spouse, you will lose half of the matrimonial property exemptions. The law deems that half to the marriage.

How Marital Contracts Change Property Divisions Upon Divorce

Prenuptial agreements protect your personal and financial assets, including your exemptions. Without a prenuptial agreement, an arrangement or understanding you reach during your marriage will not govern how the court will divide or assess your property after your marriage ends. You need to have a properly executed and completed prenuptial agreement with independent legal advice to ensure that all provisions will be legally enforceable after your marriage ends.

Conclusion

The MPA is a complex piece of legislation. Alberta’s matrimonial property regime (MPR) applies whenever: For example, it may apply if you and your spouse separate or arrange a separation agreement or divorce. It may also apply if you or your spouse is deceased and the Wills and Succession Act governs your estate. Your lawyer can provide you with a complete analysis of your property and how it should be divided under the act, considering all the above rules. Alberta Divorce Finances is a divorce financial planner in Calgary, helping you understand your financial options and implications during divorce. Led by Sharon Numerow, a financial divorce specialist, certified mediator and certified tax specialist in Calgary, we provide the tools and support needed to preserve your long-term financial interests. If you need divorce mediation services in Calgary, AB, we’ve got you covered! Get in touch with us today!