What Is Exempt Property Under Alberta's Family Property Act?

If you own assets you brought into the relationship or received from family, you may wonder whether they are safe in a separation. The Family Property Act answers that with a list of exemptions, but the protection has limits.

This article explains the categories the Act exempts, how the exempt value is fixed, what is not protected, and how to prepare. It is general information, and how it applies to your assets depends on the facts.

This article covers the law of Alberta.

What exempt property means

The Court may divide all property owned by the spouses or adult interdependent partners, whether owned jointly or individually. Section 7(2) carves out certain property from that pool, so it is not distributed. The Act does not define the word property, so questions about unusual assets are worth raising with a lawyer.

The Family Property Act is the former Matrimonial Property Act renamed, and the changes took effect January 1, 2020. It applies to adult interdependent partners as well as married spouses. Spouses who were divorced or living separate and apart before January 1, 2020 generally stay under the old Matrimonial Property Act, although sections 15 and 18 of the new Act apply if the event or separation was on or after February 1, 2012. For adult interdependent partners, the Act applies only if they had not begun living separate and apart, and had not become former partners, before January 1, 2020.

The categories the Act exempts

• Property received as a gift from a third party.
• Property received by inheritance.
• Property a spouse acquired before the marriage, where there was no interdependent relationship beforehand.
• Property acquired before an interdependent relationship began, including where the spouses were in one immediately before marriage.
• Property an adult interdependent partner acquired before their relationship began.
• Tort damages or settlements awarded to one spouse or partner.
• Proceeds of a non-property insurance policy.

There is an exception for damages and insurance. They are not exempt to the extent they compensate a loss suffered by both spouses or partners.

How the exempt value is fixed, and what happens to growth

What is exempt is the market value of the property on a fixed date. That date is the later of the marriage date (or the date the interdependent relationship began, where applicable) and the date the property was acquired.

The growth in value is treated differently. The gap between the exempt value and the market value at trial, including for property obtained by exchange or from sale proceeds, is not exempt. The Court distributes that growth in a manner that is just and equitable after considering the section 8 matters, so it is not automatically shared equally. Unless a written agreement that meets section 38 provides otherwise, the valuation date is the date of the trial.

What the exemption does not protect

Several kinds of property are distributed on the just-and-equitable basis rather than exempted. They include property bought with income from exempt property during the marriage or relationship, property acquired after a decree nisi, nullity, judicial separation or declaration of irreconcilability (or after partners became former partners), and gifts between spouses or partners.

A home is a common example. The Act's family-home provisions apply whichever spouse is on title, and a home held by only one spouse is still subject to division, subject to the exemption for property owned before the relationship and the sharing of its growth. How mixing exempt money with other assets, or investing it in a shared home, affects the exemption depends on the facts and is worth confirming with a lawyer.

Property that is not exempt is not divided the same way in every case. For spouses, property acquired during the marriage that is not exempt and not dealt with under section 7(3) is distributed equally, and adult interdependent partners have the same rule for property acquired after their relationship began. That equal split yields where it would not be just and equitable after the Court considers the section 8 matters. These include contributions to the family and to acquiring or improving property, each party's income and obligations, and the length of the marriage or relationship.

A written agreement can change the picture. A subsisting agreement can displace Part 1 of the Act if it meets section 38, which requires each party to acknowledge in writing, apart from the other, that they understand its effect and intend to give up possible claims, and to sign freely before a lawyer who does not act for the other party. Adult interdependent partners may also opt out of the default rules by signing their own agreement dividing property differently.

Showing what is exempt: what to do next

The Court of King's Bench Financial Disclosure Statement includes a sworn itemized list of income, assets and liabilities and a list of property claimed as exempt under section 7. Each party must also disclose all their property wherever located, including property disposed of within one year before the application. You are listing assets under oath, so accuracy matters.

• Gather records showing when you acquired each asset and its market value on the later of the marriage or relationship start date and the date you acquired it.
• Keep gift and inheritance paperwork, such as estate documents, transfer records or letters.
• Keep settlement or insurance records for any damages you received, and note who suffered the loss.
• Trace where sale proceeds or exchanged assets went.
• Avoid moving exempt funds into joint accounts or property without advice.
• Ask a lawyer to review your list before you swear a statement.

Frequently asked questions