If I paid the down payment on the house from money I had before the relationship started, do we have to split the family house equally in the case of separation or divorce?

People often wonder in the case of separation what happens to the family home if one spouse contributed money they had before the relationship to the purchase of the family home. They wonder if their down payment on the family home will be divided when they separate or divorce or if it will be excluded from the division of family property.

The answer to these questions depends on the source of the down payment. In the Family Law Act, which came into effect March 18, 2013, it splits property into two categories: “family property” and “excluded property”.

Excluded property is listed in s 85(2) of the Family Law Act and includes property acquired by a spouse before the marriage or before the spouses began living together in a marriage-like relationship. To learn more about family property and excluded property, please read our blog post on the subject of excluded property.

If you only contributed family property to the purchase of the family home, the family home will be divided equally if you separate.

A recent case, KR v J D (2017), explains that if a spouse contributed excluded property, which can be proven and traced, to a jointly-owned family home, the amount of money they contributed remains excluded property.

For example, let’s say you entered a relationship with $50,000 and you put that money towards the purchase of your family home. That $50,000 is excluded property because you had it before the start of the marriage or before you started living with your spouse in a marriage-like relationship.

If you put that $50,000 towards the purchase of a home owned jointly by both you and your spouse, that $50,000 will remain excluded property. As a result, if you and your spouse separate, you will be entitled to that $50,000 and the rest of the value of the home will be split between you and your spouse.

excluded propertyRemember you must be able to prove that the $50,000 was excluded property and that you put it into the purchase of the house. Therefore, you’ll need two things: evidence that you had $50,000 in excluded property and evidence you put it into the home. This evidence might include a bank statement showing this amount in your account when the relationship started and a second bank statement showing its withdrawal when the home was purchased.

However, if your family home is only registered in your spouse’s name, a recent case, V.J.F. v S.K.W. (2016), explains that any excluded property you contributed to the family home will be considered a gift to your spouse and won’t remain your excluded property. An inheritance received by a spouse is usually excluded property, but in this case the husband received a $2 million inheritance and used this money to fund construction of a new family home that was only registered in the name of the wife. The court found that this money was a gift from the husband to the wife. As a result, the family home was not excluded property and was split equally between the spouses.

In other words, without a marriage agreement or a cohabitation agreement, if you put $50,000 of excluded property towards the purchase of a home that was only registered in the name of your spouse, that $50,000 would become family property because it would be considered a gift to your spouse.

It’s important to note that any increase – or decrease – in the value of the family home during the relationship will usually be shared, unless you have a marriage agreement or cohabitation agreement that says otherwise.

We hope this post clears up the confusion about excluded property and the family home. If you are interested in an agreement that will protect your excluded property during a divorce or separation or if you have any questions about excluded property or family property in British Columbia, give us a call at 604.449.7779.

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