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Family and Divorce Law
Inherited Property & Separation in BC: New Section 85 Rules Explained
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Inherited Property & Separation in BC: New Section 85 Rules Explained
Did you recently receive a large inheritance? You might use this money to buy a beautiful home for your family. However, you decide to register your spouse’s name on the property title. If you separate, will your spouse take half of your inheritance?
As a practicing lawyer in British Columbia and Ontario, clients ask me this exact question almost every single day.
Introduction: The Big Inheritance Dilemma
Protecting inherited property during separation in BC is a major concern for many families. For many years, the legal answer in British Columbia was a scary yes. Your hard-earned family legacy could be heavily impacted by old property rules.
The Old Rule: The V.J.F. vs. S.K.W. Chaos
In 2016, a highly important Court of Appeal case named V.J.F. v. S.K.W. ruled on this issue. The court decided that transferring an excluded asset to your spouse’s name created a legal gift.
This applied if you put the inheritance in your partner’s name or into joint names. Your protected asset instantly transformed into family property. Consequently, your ex-spouse could walk away with half of your inheritance money.
This ruling caused absolute financial chaos for separating couples across British Columbia. Many people were forced to lose their hard-earned life savings due to this strict legal presumption.
The New Law: Section 85 Amendments to the Rescue
There is very important news for residents of British Columbia. The government finally recognized that the old law did not match what ordinary people consider fair.
Therefore, they officially amended the Family Law Act. Under the newly enacted Section 85 and Subsection 3, the old legal gift rule has completely changed.
Now, your exclusion remains valid despite the transfer. This applies if you transfer your excluded asset to joint names or completely to your spouse. You can successfully keep what is rightfully yours.
Your inheritance or the assets you brought into the relationship remain fully protected under these new rules.
The Catch: Growth in Value is Still Split
While the new law offers protection, you must still be extremely careful. The law states that you can only keep the initial value of that asset for yourself.
Any subsequent increase in the home’s value during your relationship is treated differently. This growth is still considered family property under Section 84 of the Act. Therefore, that specific financial growth will be divided equally between you and your spouse.
Effective Date: Does the New Law Apply to You?
This new law is not retroactive for older cases. It only applies to court cases or separation agreements that started after October 3, 2023.
If your legal case began before that date, the old rules of gift may still apply to you. In those specific circumstances, we may have to argue for an unequal division under Section 95.
Seek Professional Legal Council
Property division is highly complex, and the family laws are constantly changing. Do not navigate this difficult path alone. Never sign any legal documents without obtaining proper legal advice.
Contact our Vancouver office at +16047679529 or our Toronto office at +14164474862. You can also visit us online at paxlaw.ca. We are here to help you.
Frequently Asked Questions
What happens if I put my inherited property in my spouse’s name in BC?
Under the new amendments, transferring an excluded asset like an inheritance into your spouse’s name or joint names does not automatically make it a gift; the initial value remains protected as your excluded property.
When did the new BC family law property rules come into effect?
The new law applies strictly to court cases or separation agreements that began after October 3, 2023 (11 Mehr 1402).
Is the growth in value of my inheritance protected during a separation?
No. Only the initial value of your inheritance is protected. Any increase in the property’s value during the relationship is divided equally as family property under Section 84.
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