Is a Personal Injury Settlement Divided in an Alberta Divorce?

You may have received money after a car accident, a medical claim or an insurance policy paying out, and now your relationship is ending. A common worry is whether your partner can claim half of it.

In Alberta, the answer often starts with an exemption, but it has limits. This article explains how the Family Property Act treats these payments for married spouses and adult interdependent partners, and what can change the result.

This article covers the law of Alberta.

Who the Family Property Act covers

The Family Property Act is the former Matrimonial Property Act, renamed with changes taking effect January 1, 2020. It now 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 Act. Adult interdependent partners are covered if they had not begun living separate and apart before that date. This article assumes you separated on or after January 1, 2020.

The exemption for injury damages and insurance proceeds

Section 7(2) exempts from distribution tort damages or a settlement awarded to one spouse or partner, and the proceeds of a non-property insurance policy. A personal injury settlement and a disability or similar payout are the usual examples.

The exemption is for the market value of the money or property, measured at 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.

When the exemption does not apply

Damages, settlements and insurance proceeds are not exempt to the extent they compensate a loss suffered by both spouses or partners. Only the part meant for a loss you both suffered is open to sharing, so how a settlement is broken down can matter.

Other kinds of money and property are not simply exempt, even when they trace back to exempt funds:

• Growth in value of exempt property, including property obtained by exchange or from sale proceeds, is not exempt.
• Property bought with income from exempt property during the marriage or relationship is not exempt.
• Gifts between spouses or partners are not exempt.
• Property acquired after a decree nisi, nullity, judicial separation or declaration of irreconcilability, or after partners became former partners, is not exempt.

How the non-exempt part is shared

Ordinary family property acquired during the marriage is divided equally, and the same equal rule applies to adult interdependent partners for property acquired after their relationship began. That presumption gives way if an equal split would not be just and equitable.

The non-exempt pieces listed above are different: the Court distributes them in a manner that is just and equitable after considering the section 8 matters, so they are not automatically split equally. Those matters include contributions to the family and to acquiring or improving property, each party's income, earning capacity and liabilities, the length of the relationship, any agreement, and any other relevant circumstance.

Disclosure, title and agreements

Each party must file a sworn statement disclosing all their property wherever located, including property disposed of within one year before the application. The Court of King's Bench Financial Disclosure Statement also includes a list of property claimed as exempt under section 7. If you rely on the exemption, the settlement should be listed and claimed there.

Whose name is on an asset does not settle things. The Court may divide property owned jointly or individually. A home held by only one spouse is still subject to division, subject to the exemptions and the sharing of growth in value.

A subsisting written agreement can displace these rules 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 claims, and to sign freely before a lawyer who does not act for the other party. Adult interdependent partners may also opt out by signing their own agreement. Unless such an agreement sets a different date, property is valued at the date of trial.

What to do next

• Gather the settlement agreement, release, court orders and insurance documents showing what the money was for.
• Record the date you received it and where the money went afterward.
• Trace any account, investment or property bought with the money or its income.
• Check for any marriage, cohabitation or partner agreement and who advised each of you.
• Keep time limits in mind. Spouses generally have 2 years from separation or from the decree to apply, and adult interdependent partners have 2 years from when they knew or should have known the relationship ended.
• Speak with a family lawyer before you file your sworn disclosure.

Frequently asked questions