What is the current state of the law on the dissipation of s. 7(2) exempt property?

Alberta, Canada


The following excerpt is from Klinck v. Klinck, 2008 ABQB 526 (CanLII):

A recent authoritative decision on the issue of exemptions is Lovich v. Lovich, 2006 ABQB 736. At para. 46, Slatter J. (as he then was) summarized the principles relating to the dissipation of s. 7(2) exempt property: Where depreciable exempt property is consumed during the marriage, the following principles should apply: (a) the initial exempt value is the fair market value of the depreciable property on the date of the marriage, or the date of the gift. (b) the exemption can be carried forward if the property is traded in, or if the property is sold and replaced. The exempt value can be traced forward into new property so long as there is a reasonable nexus between the exempt property and the replacement property. No precise and exact tracing is required, and de minimus breaks in the chain of exempt property can be tolerated. (c) the amount of the exemption is lost as the property is consumed up or depreciated. If, by the time of trial, the property has been totally consumed and depreciated, there is no remaining exempt value. (d) if the property is partly consumed and depreciated, and then traded for other property, the value at the date of the trade‑in is carried forward into the new property. If that new property is then consumed or depreciated, the exempt portion is deemed to be consumed pro rata with the non‑exempt portion.

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