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Exemptions When Dividing Assets During Divorce

Exemptions When Dividing Assets During Divorce

In Alberta, the division of property is governed by the Matrimonial Property Act or the Family Property Act – depending on the date of separation. Both the Matrimonial Property Act and the Family Property Act instructs that property be divided such that 1) we should apply a presumption of equal sharing to property acquired during the marriage, unless it is not just or equitable to do so, 2) to entirely exempt from sharing property acquired outside of the marriage and 3) to distribute certain other categories of property such as increases in value of exempt property, as may be “just and equitable”. Our team of Calgary based lawyers know the law when it comes to exemptions. Read on to find out their insight.

What is An Exempt Asset?

Exempt property is:

  • property acquired by a gift from a third party;
  • property acquired by inheritance;
  • property acquired before the marriage;
  • an award or settlement for damages in tort, unless the award or settlement is compensation for loss to both spouses; or
  • the proceeds of an insurance policy that is not in respect of property, unless the proceeds are compensation for loss to both spouses.

It’s important to note that what is exempt from sharing is only the market value of the property at the time of marriage or on the date the property was acquired, whichever is later.

Exempt Assets in Joint Names

It’s quite common for a party to have an exempt asset that is put into joint names. The situation that we often see is exempt funds being used for the purchase of a new home, although the concept is applicable to any exemption put into joint names. When an exemption is put into joint names, 50% of the exemption remains exempt. It is not subject to distribution between spouses upon marriage breakdown. The other 50% remains available for distribution on a “just and equitable” basis. It is also very common for exempt funds to be placed into a joint bank account for a short period of time, prior to being invested in one party’s sole name. When an account acts as a conduit the exempt nature of the original funds will not be lost, notwithstanding that the exempt asset was temporarily placed into joint names. Instead, the exception will flow through to the newly acquired asset.

What about Debt?

Another matter to consider is whether or not the spouses claiming the exemption came into the marriage with a substantial liability. In that case, it can be argued that the liability should be offset against the exemption or taken into consideration when ascertaining the division of the exemption’s increase in value.


Disclaimer: The content provided in the blog posts of Jones Divorce & Family Law is general information and should not be considered legal advice. Please contact a lawyer for legal advice tailored to your specific situation. All articles are current as of their original publication date.