The Family Law Act provides that when calculating net family property a spouse may deduct the value of certain assets owned on the date of marriage. For example, if one had a stock worth $100,000 on the date of marriage but that on the date of separation it was worth $200,000, one would only share the growth of the $100,000 during the course of the marriage. The one exception to this is the matrimonial home. If on the date of separation a spouse owned a home and continued to reside in that same home until the date of separation, he or she would not be allowed to deduct the value of that home at the date of marriage. On the other hand, if he or she owned a home on the date of marriage but that same home ceased to be the home on the date of separation, the spouse would enjoy the deduction.
Exclusions can be more complicated than calculating deductions. The Act provides that any assets one may inherit or receive as a gift from any third party during the marriage, which means someone other than the spouse, are excluded from the calculation of net family property, provided that the spouse managed to keep it separate and it still exists on the date of separation. For example, if during the marriage one had been gifted that same stock worth $100,000 and on the date of separation it was worth $200,000, the entire $200,000 would be excluded from the calculation of net family property. This would not apply to the matrimonial home. A spouse would also lose the exclusion if he or she invested the proceeds from that stock in the matrimonial home, including paying down the mortgage, as well as any other asset that would otherwise be excluded.
Generally, excluded property includes not just gifts but inheritances given only to one of the spouses, increases in the value of gifts or inheritances where the donor expressly stated in his or her Will that it was to be excluded the beneficiary’s family property, increases in the value of property, other than a matrimonial home, where the property can be traced to an excluded property, money received as a result of a personal injury claim, proceeds of a life insurance policy paid or payable on the death of the insured, and any other property that the spouses agreed to be excluded pursuant to a marriage contract or cohabitation agreement.
Excluded property can nonetheless be included in a spouse’s net family property if it has become commingled with other family assets, and not just the matrimonial home, or if the other spouse can show that there was a common intention to share the benefit of the excluded property. The law appears to be changing, if only incrementally, so that commingling may be less of a bar than it was in the past.
By Charles Baker