A person may be entitled to a credit known as an exemption where there was property acquired:

1. by gift;
2. by inheritance;
3. before the marriage or relationship;
4. by personal injury settlement; or
5. by insurance settlement.

In each case, it's the equity that's exempt (Campa v Campa, 2016 ABCA 187 at para 18). That generally means subtracting the debt that existed as of the date the exemption is valued (see below to determine the valuation date).

As discussed below, the increase in value of the exemption or acquired using the income generated from exempt property can still be shared, but not necessarily equally. That increase/income is not presumed to be divided equally (Hodgson v Hodgson, 2005 ABCA 13 at para 20). Instead, the increase/income is divided in a manner that the Court considers just and equitable, considering factors such as each spouse/partner's contribution, financially or otherwise, direct or indirect, to the acquisition, conservation, improvement, operation or management of the property. If the exempt property was received after their separation, then the increase in value is also exempt (Mazurenko v Mazurenko, 1981 ABCA 104 at para 20; Hodgson v Hodgson, 2005 ABCA 13 at para 20).

The spouse/partner claiming an exemption is who has to prove it. “…evidence must always be sufficiently clear, convincing and cogent” to satisfy that it's more likely than not that the property is exempt (FH v McDougall, 2008 SCC 53 at para 46, cited in Rehman v Sadouzai, 2020 ABQB 623). This is known as the onus or burden of proof. Courts can infer the value when values are known near the relevant dates (Grant v Grant, 2016 ABQB 198 at paras 77, 78). If bank/investment statements can be obtained, then they must be obtained, even if obtaining those records is costly (Marshall v Marshall, 2019 ABCA 438 at para 4).

If the exempt property is exchanged, transferred, or sold and the proceeds placed into new property, then the exemption continues so long as it can be traced. Our Court of Appeal has stated a few principles relating to tracing exemptions:

1. an exemption will be maintained if exempt property can be traced into replacement property, but some tracing must be possible;
2. Tracing can be inferred, implied or presumed. Physical or accounting precision in tracing is not required, as long as a fair connection between the exempt property and the replacement property can be seen;
3. If there is Dissipation of the exempt property, then it loses it's exemption; and
4. the consumption or dissipation of exempt property does not create any "notional debt" that must be accounted for before the balance of the family property is distributed.

An exemption may be lost of it's been comingled with non-exempt assets to the point that we're no longer able to identify or trace the exemption (CM v AM, 1990 ABCA 194 at para 9; MacFarlane v MacFarlane, 2016 ABCA 183).

If exempt assets are placed into the joint names of both spouses/partners, or placed into jointly-owned assets, then half of the original exemption credit is lost. For example, if exempt funds are transferred into a joint bank account, or the couple is purchasing a home that they'll both jointly own, and one of them uses exempt property to pay the down payment. This halving is known as the Rule in Jackson and Harrower. In theory, they gifted half of their exemption to the other spouse (although whether that's actually the case is debatable -- this rule does catch many people off guard and has been the subject of debate within the legal community). There is an exception where it can be proven that the person claiming the exemption intended to retain their beneficial interest. That might be the case where there is an agreement or promissory note providing for the return of the exempt property, for example.

Different rules applies to unmarried couples who separated before 2020. See Unmarried Property Division.

• Gifts
• Inheritances
• Insurance Settlements
• Personal Injury Settlements
• Property acquired before the Marriage/Relationship

When claiming an exemption in relation to a gift, the gift must have been received from a third party. In other words, gifts between spouses/partners are not exempt.

If property was purchased at much less than fair market value because a friend or family member wanted to cut a break, then the difference might count as a gift (Peregrym v Peregrym, 2015 ABQB 176 at paras 310-326).

Receiving property in exchange for labour is not a gift (Mazurenko v Mazurenko, 1981 ABCA 104 at para 12).

This credit is valued as of the date the gift is received, unless it qualifies as property acquired before the marriage/relationship (see below). Any increase in value of gifts can still be divided, although not necessarily equally.

If a law firm was involved with probating or administering the estate, the may still have records.

The deceased's financial institution may still have records of transactions and discussions that occurred following the deceased's death.

This credit is valued as of the date the inheritance is received, unless it qualifies as property acquired before the marriage/relationship (see below). Any increase in value of inheritances can still be divided, although not necessarily equally.

This credit applies only to insurance proceeds that are not in relation to property, and not compensation for a loss to both spouses.

For example in a car accident, if insurance compensated you for an injury then you may receive a credit, but not for the portion that reimbursed you for damage to your vehicle.

This credit is valued as of the date the insurance proceeds are received, unless it qualifies as property acquired before the marriage/relationship (see below). Any increase in value of the insurance proceeds can still be divided, although not necessarily equally.

This credit applies where a spouse/partner receives an award or settlement for damages in tort in favour of that spouse, unless the award or settlement is compensation for a loss to both spouses.

A tort is a civil court lawsuit, and includes various kinds of lawsuits such as personal injuries following car accidents, slips and falls, assault/battery, sexual assault, trespassing, taking property (conversion), and other negligence or intentional conduct.

The portion of an award relating to lost income may not be exempt, or may be considered as income when determining child support or spousal/partner support (for example, see Nuttall v Rea, 2005 ABQB 151).

If the settlement isn’t itemized, and it’s possible that there could have been compensation to both, then the entire settlement might not be exempt (Basile v Basile, 2017 ABCA 385).

This credit is valued as of the date the settlement is received, unless it qualifies as property acquired before the marriage/relationship (see below). Any increase in value of the settlement can still be divided, although not necessarily equally.

This exemption is valued as of the following date:

1. If the couple was married and were Adult Interdependent Partners before they married, then the valuation date is the date that they began living in a relationship of interdependence. This is usually when they began living together, if they lived together for at least 3 years prior to marriage or had any children together.
2. If they were married but were not Adult Interdependent Partners before they married, then the valuation date is that date of their marriage.
3. If they were unmarried but are Adult Interdependent Partners, then the valuation date is the date that they began living in a relationship of interdependence. This is usually when they began living together, if they lived together for at least 3 years prior to marriage or had any children together.
4. If they were unmarried and were not Adult Interdependent Partners then these rules don't apply, instead see Unmarried Property Division.

Any increase in value of this property can still be divided, although not necessarily equally.