When couples separate, one of the biggest questions is, “What happens to our property?” While many jointly acquired assets are divided, primarily pursuant to Alberta’s Family Property Act, it is important to note that not everything goes into the shared pot.
The Family Property Act, RSA 2000, c F-4.7, recognizes that some assets should remain with the person who brought them into the relationship or received them personally. Certain types of property are classified as exempt, meaning that their original value is protected and not divided between partners.
Examples of Exemptions
Property You Owned Before the Relationship
If you owned a home, vehicle, investments, or other assets before you started living together or got married, the original value of that property is typically exempt. Only the increase in value of such property during the relationship may be divisible.
Gifts from Third Parties
If your parents gave you a car or your aunt gifted money to you, that gift is usually exempt, provided it was clearly intended for you alone. A gift letter can be your best evidence because it helps preserve your exemption, identifies the giver, states the amount or asset, confirms it was a gift rather than a loan, and clarifies that the gift was not intended as joint property.
Inheritance
Money or property inherited from a family member is one of the strongest exemptions. Again, the key is keeping inheritance funds separate from joint accounts or from otherwise being commingled with jointly owned property. Once inheritance funds are mixed into joint accounts or used for joint purchases, the exemption can weaken or be lost altogether.
Personal Injury Awards
Compensation for pain, suffering, or disability is generally exempt. However, portions meant to replace lost income or future income may be treated differently.
Insurance Proceeds for Non-Family Property
If you received insurance money for damage to exempt property, that payout is usually exempt as well.
Certain Interests in Trust
Some trust property is exempt. This depends on how the trust is structured, whether the beneficiary has control, and whether the trust funds were used for family purposes.
The Catch: Commingling Assets with Family Property
Exemptions can disappear if the asset is mixed with family property. For example:
Using inheritance money as a down payment on a jointly titled home;
Depositing exempt funds into a shared bank account; or
Renovating the family home with exempt assets.
Courts often look at whether the asset can still be traced back to its exempt source. In the case of depositing funds into a joint account, however, the very act of doing so may destroy the exemption entirely.
Proving an Exemption
A person claiming an exemption must prove it. This means documentation is essential. Useful records include purchase documents from before the relationship, trust agreements, gift letters, or property appraisals showing the value of property acquired before the relationship.
Why Exemptions Matter
It is important to understand exemptions because they can help protect what is legally yours, help you make informed decisions during separation, and help you avoid unnecessary conflict or misunderstandings.
If you are unsure whether something qualifies as an exemption, learning more about our family property legal services can help you clarify your rights and avoid costly mistakes.