The Final Say on The Presumption of Advancement

The Final Say on The Presumption of Advancement:

Leave for appeal of V.J.F. v. S.K.W., 2016 BCCA 186 to the Supreme Court of Canada was denied. V.J.F. v. S.K.W., is now the final word on whether the presumption of advancement still applies in BC. The answer is an astounding yes! The presumption of advancement still applies in BC and the Family Law Act (BC) is not a complete code in determining property and debt division between spouses.

What does this mean for you?

This means that although the Family Law Act (FLA), which provides for the division of property and debt between separated or divorced couples in BC, states that inheritances and gifts from third parties are your "excluded property" and therefore cannot be divided between your spouse and you, the common law presumption of advancement may still entitle your spouse to share in this property.
This is specifically the case if a person puts her inheritance or gift, that she received from a third party, into joint names with her spouse or solely into her spouses' name. Under the presumption of advancement this transfer will be seen as a gift from you to your spouse, thereby nullifying what would have been your excluded property under the FLA, unless you are able to rebut this presumption through evidence showing otherwise. This also means that parents should proceed cautiously when financially assisting their adult children, who are in married or in common-law relationships.
As the presumption of advancement was invented to resolve questions where the intent of the giftor is unclear or uncertain, the Court of Appeal states that there are still means by which you can protect against losing the excluded property. Specifically by having your spouse acknowledge (in writing) that upon transfer of the property to them, there is no intent by you to gift the property to your spouse and that upon separation or divorce this property is to be treated as your excluded property.

So if you intend on transferring excluded property such as inheritances or third party gifts to a spouse, you should ensure in writing if the property is to remain excluded property or whether you intend to gift the property to your spouse. Otherwise under the presumption of advancement, the court will rule that a gift was intended to the spouse and therefore the property will no longer be treated as excluded property.
Here are the relevant parts of the V.J.F. v. S.K.W. decision:

[77] In the absence of a clear statement abolishing the presumption of advancement, I also conclude that it continues to apply under the FLA (although I would not necessarily refer to it as a “right” within the meaning of s. 104). Had the Legislature intended to abolish the presumption, it would have been an easy thing to so state, as other provinces have done. It would also be an easy matter to provide, or perhaps clarify, that the presumption applies to common law as well as formal marriages and even that it should apply to gifts from a wife to her husband, not just the reverse. (See Donavan Waters, Mark Gillen and Lionel D. Smith, Waters’ Law of Trusts in Canada (4th ed., 2012) at 413; J.B. v. S.C., supra, at paras. 85-7; Lawrence v. Mulder, supra, at paras. 66-75; Kerr v. Baranow 2011 SCC 10 (CanLII) at para. 20.)

[78] I acknowledge that judges may in some cases have to determine whether transfers of excluded property that may have taken place years before, were gifts or not. This seems likely to occur most often in cases where inherited property is transferred by the heir to his or her spouse or into joint names. (Of course, the presumption of advancement was invented as a way of resolving such questions where the evidence is unclear or equivocal.) That said, there are means by which the inheriting or recipient spouse can protect against ‘losing’ the exclusion. Subject to other relevant provisions of the FLA, for example, the transferor can require the transferee to acknowledge that no gift of the excluded property (or its value) is intended.

[79] Finally, I take some comfort from the fact that my conclusions are generally in accord with the conclusions arrived at by other appellate courts under other “excluded property” legislation, and in particular from the fact that most jurisdictions regard inter-spousal gifts as constituting family property rather than exempt or excluded property.


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