Were My Parents Right? – Implications of the Family Property Act
My parents have always harped about not moving in with a partner until we’re married. Recent changes to the Family Property Act (the “Act”), suggest they may have been on to something as long term dating may trigger entitlement to property.
The Act, which replaced the Matrimonial Property Act, governs the division of property when a relationship breaks down and makes all property subject to “division” unless it is exempted by legislation or it is excluded by agreement.
The former Matrimonial Property Act applied only to “spouses”; however, the Act now applies to both “spouses” and “adult interdependent partners” (“AIP”), which means that a wider group of individuals are captured under the legislation.
So what is an AIP? Generally, people become AIPs when they live together in a relationship of interdependence:
- for a continuous period of 3 years or more; or
- of some permanence, if there is a child of the relationship by birth or adoption;[1]
Generally, a relationship will be deemed interdependent when two people are not married to one another but still share one another’s lives, are emotionally committed to one another, and function as an economic and domestic unit.
A few things that AIPs can apply for though the Act include:
- a family property order to have property distributed;
- exclusive possession of a family home and/or exclusive use of household goods; and
- disclosure of property.
For the most part, division of property under the Act is based on the market value of the property and not the actual physical property, which means you won’t be splitting or sawing anything in half, but rather giving the fair market value of the property. The applicable date when market value is calculated is either the date the relationship of interdependence began, or the date the AIP acquired the property (whichever is later).
The Act does exempt certain property’s market value, such as property acquired by gift from a third party (like parents), property acquired by an AIP by inheritance, and property acquired by an AIP before the relationship of interdependence began.
All this considered, gifts from third parties (parents) to a person (child) are exempt property, meaning that the value of the property from latest of the date of receipt, or the date the relationship became an AIP is exempt. However, increases in value from such date are not exempt.
Why does this matter? One of the main differences between marriage and an AIP relationship is that marriages have a notable (and hopefully memorable) start date. AIP relationships are based on cohabitation[2], which can occur early in a relationship and then the 3rd anniversary of cohabitating can pass without much fanfare. The date that determines what value is exempt and what value is subject to family property division is the date that the cohabitation starts (not the 3rd anniversary, meaning property entitlement back dates to the move-in date).
Thus, before you move in with your partner, you should consider whether you’re willing to have property divided in the event of a break down of a relationship. Not only that, but keep in mind that the Act introduces and subjects AIP relationships to a full regime of property division and disclosure.
Third parties (such as parents) should also take stock of their children’s relationships being that if it becomes an AIP relationship, it may have implications on succession or estate plans, just like they would if their children were about to get married.
If you wish to discuss the above or any of your Wills & Estates needs, please contact Crista Osualdini, Moe Denny, or Michelle Fong. As necessary and in light of the circumstances, our Wills & Estates team is available to assist you on evenings and weekends and will work to accommodate your schedule and circumstances to ensure that you are properly prepared.