FAQ: Division Of Property

Find out the answers to frequently asked questions ("FAQs") with regard to family law and other legal issues.

Dividing Pensions

A complex area of Family Law in Ontario is dividing pensions among separating parties; specifically, dividing the pension at source.

The new laws in the Ontario Family Law Act with respect to dividing the parties pensions, outline that a pension should be divided at source.

Section 10.1 of the Ontario Family Law Act was intended to solve the problem of a court requiring the consent of both parties with respect to transferring the parties’ pensions from one to another.

Rule 10.1 Family Law Act states as follows:

  1. (1)A person may apply to the court for the determination of a question between that person and his or her spouse or former spouse as to the ownership or right to possession of particular property, other than a question arising out of an equalization of net family properties under section 5, and the court may,

(a) declare the ownership or right to possession;

(b) if the property has been disposed of, order payment in compensation for the interest of either party;

(c) order that the property be partitioned or sold for the purpose of realizing the interests in it; and

(d) order that either or both spouses give security, including a charge on property, for the performance of an obligation imposed by the order, and may make ancillary orders or give ancillary directions.  R.S.O. 1990, c. F.3, s. 10 (1).

The case of VanderWal v. VanderWal clarified the fact that the new legislation regarding the division of pensions is not a presumption or statutory onus. The Court cited Nadendla v. Nadendla, which held that:

. . .  If the pension is not divided at source, the Applicant will have to deplete virtually all his liquid assets. In the result, his assets will be tied up in the pension while all of the Respondent’s assets will be liquid. In contrast if the pension is divided at source both the parties will have a reasonable balance between liquid assets and savings for retirement.

Ultimately, The Court in VanderWal conveyed that each case will be judged on its own facts and that s.10.1 of the Family Law Act “merely creates another way for an equalization payment to be made.”

To learn more about dividing pensions as well as the services provided by Krol & Krol, call 905.707.3370 today.

Unequal Division of Property – Affairs

The law with respect to division of property between spouses in Ontario is governed by the Family Law Act. The Family Law Act dictates that the spouses must conduct a Net Family Property when dividing up their property. This Net Family Property will result in one party having to pay his/her spouse an equalization payment.

However, in exceptional cases, the Family Law Act allows for an “unequal” division of property. These circumstances are outlined in section 5(6) as follows:

(6) The court may award a spouse an amount that is more or less than half the difference between the net family properties if the court is of the opinion that equalizing the net family properties would be unconscionable, having regard to,

(a) a spouse’s failure to disclose to the other spouse debts or other liabilities existing at the date of the marriage;

(b) the fact that debts or other liabilities claimed in reduction of a spouse’s net family property were incurred recklessly or in bad faith;

(c) the part of a spouse’s net family property that consists of gifts made by the other spouse;

(d) a spouse’s intentional or reckless depletion of his or her net family property;

(e) the fact that the amount a spouse would otherwise receive under subsection (1), (2) or (3) is disproportionately large in relation to a period of cohabitation that is less than five years;

(f) the fact that one spouse has incurred a disproportionately larger amount of debts or other liabilities than the other spouse for the support of the family;

(g) a written agreement between the spouses that is not a domestic contract; or

(h) any other circumstance relating to the acquisition, disposition, preservation, maintenance or improvement of property.  R.S.O. 1990, c. F.3, s. 5 (6).

A former spouse often attempts to make the argument that they should be awarded an amount that is more than the equalization payment on account of the direct and/or indirect expenses their former spouse incurred to finance his/her extra-marital affair.

Justice Perkins, in the cases Biant v. Sagoo and Consentino v. Consentino, clearly explains that the ultimate purpose of section 5(6) was to ensure that spouses were not arbitrarily punished for their matrimonial misconduct.

Justice Perkins stated as follows:

It would be a novel proposition that a philandering spouse is responsible under subsections 5(6) for paying to the other spouse a sum equal to the cost of an affair, either direct costs (jewellery and such) or indirect costs (diminished profits from business).  . . .  There was no evidence that the husband’s expenditures materially affect the family in any way and certainly no evidence that the wife has been called on to show any portion of them.

However, normally objectionable or emotionally harmful the husband’s conduct may have been in this case, it is only open to the court to respond to it under section 5(6) if it falls within one of the eight clauses of that provision. There was no evidence in this case that the husband’s affairs had any significant effect on the parties’ debts, liabilities, or property. There is accordingly no remedy under section 5(6) for the matrimonial misconduct of the husband. Indeed, section 5(6) was very tightly drawn specifically so as to exclude consideration of matrimonial misconduct such as this.

However, that is not to say that if the former spouse’s affair fit the description of one of the eight circumstances in section 5(6), an unequal division of property could not be awarded. Thus, if the affair is proven to have depleted the property of the marriage or to have incurred large amounts of debts and liabilities, the spouse who had committed the affair may be subject to a claim for an unequal division of property.

To learn more about division of property as well as the services provided by Krol & Krol, call 905.707.3370 today.

Equalization claims – Limitation periods

The Family Law Act states lays out the limitation periods as follows:

(3)  An application based on subsection 5 (1) or (2) shall not be brought after the earliest of,

(a) two years after the day the marriage is terminated by divorce or judgment of nullity;

(b) six years after the day the spouses separate and there is no reasonable prospect that they will resume cohabitation;

(c) six months after the first spouse’s death. R.S.O. 1990, c. F.3, s. 7 (3).

Cases such as Horner v. Horner, Rae v. Rae, Hart v. Hart and El Feky v. Tohamy, canvas the issue of a court using its discretion to allow for an extension of the above-cited limitation periods.

Generally, the case law suggests that judges will determine whether the applicant, in an application to extend the limitation period, has acted in good faith.

As section 2(8) of the Family Law Act explains,

(8)  The court may, on motion, extend a time prescribed by this Act if it is satisfied that,

(a) there are apparent grounds for relief;

(b) relief is unavailable because of delay that has been incurred in good faith; and

(c) no person will suffer substantial prejudice by reason of the delay.

Ontario jurisprudence has also dealt with the issue of whether the negligence of the applicant is considered to be acting in bad faith.

In Hart v. Hart, the Court stated:

Section 2(8) (b) enshrines in legislative form the concept of ‘good faith’. As is not infrequently the case, these words are not defined in the Act, and I do not believe that it would be either possible or useful to attempt to catalogue the possibilities that they embrace. However, I must attribute to these words their “plain meaning according to the understanding and practices of the times”: Cash v. George Dundas Realty Ltd.[1973], 1 O.R. (2d) 241 (CA) I believe, to establish ‘good faith’, it must be shown that the moving party acted honestly and with no ulterior motive it does not seem to me that the Legislature, anticipating the general newsworthy nature of the family property provisions or the Act, intended that the mere failure to make inquiries should necessarily negate ‘good faith’, provided that the absence of enquiry does not constitute willful blindness or does not otherwise, in all of the circumstances, fall below community expectations. As I have stated, my assessment of the evidence is that the wife was ignorant of her rights under the Act, and I believe that her state of mind was one of blameless ignorance. I am satisfied that the delay in issue was delay incurred in good faith within the meaning of the Section 2(8) (b).

To learn more about equalization claims as well as the services provided by Krol & Krol, call 905.707.3370 today.

CPP and Credit Splitting

Depending on where spouses got married, more often than not, they will not be able to contract out of the obligation to split the member-spouse’s Canadian pension upon separation.

“Credit splitting” is the term that the Canada Pension Plan refers to when dealing with the splitting of a member’s pension for matrimonial purposes.

The section in the Canada Pension Plan that deals with credit splitting of a member’s pension is section 55.2. In section 55.2(2), the Canada Pension Plan explains that spouses may not contract out of the credit splitting of a member’s pension:

“Except as provided in subsection (3), where, on or after June 4, 1986, a written agreement between persons subject to a division under section 55 or 55.1 was entered into, or a court order was made, the provisions of that agreement or court order are not binding on the Minister for the purposes of a division of unadjusted pensionable earnings under section 55 or 55.1.”

However, the Canada Pension Plan does allow for the parties to contract out of section 55.2 and waive their spouse’s CPP credits in certain circumstance. Section 55.2(3) conveys the circumstances by which a contract stating that the parties waive their rights to each other’s CPP credits will be upheld. It states as follows:

“Where:

(a) a written agreement between persons subject to a division under section 55 or 55.1 entered into on or after June 4, 1986 contains a provision that expressly mentions this Act and indicates the intention of the persons that there be no division of unadjusted pensionable earnings under section 55 or 55.1,

(b) that provision of the agreement is expressly permitted under the provincial law that governs such agreements,

(c) the agreement was entered into

(i) in the case of a division under section 55 or paragraph 55.1(1)(b) or (c), before the day of the application for the division, or

(ii) in the case of a division under paragraph 55.1(1)(a), before the rendering of the judgment granting a divorce or the judgment of nullity of the marriage, as the case may be, and

(d) that provision of the agreement has not been invalidated by a court order,

that provision of the agreement is binding on the Minister and, consequently, the Minister shall not make a division under section 55 or 55.1.”

Currently, the only Canadian provinces to pass clear legislation that allows for parties to waive their rights to each other’s CPP credits are Quebec, Saskatchewan and British Colombia.

To learn more about credit splitting as well as the services provided by Krol & Krol, call 905.707.3370 today.

Common law spouses and property rights

As was evidenced in the case of Canadian Charter of Rights and Freedoms in Nova Scotia (AG) v. Walsh, common law spouses, unlike married ones, do not have statutory property rights. Thus, when a common law spouse claims a right in property against his/her former partner, the case to be made is one of constructive and/or resulting trust.

When making a claim based on resulting/constructive trust, the imperative principles to prove are as follows:

  1. The defendant was enriched;
  2. The plaintiff has suffered some sort of deprivation; and,
  3. There is no juristic reason for the enrichment.

In sum, the court will look to reimburse the unjust enrichment.

The case of Kerr v. Baranow posited that where a common law spouse makes a property claim based on constructive/resulting trust, the court is not restricted, in its decision, to award a portion of the property to the claimant. As is most commonly awarded today, courts can award the claimant monetary compensation for their share in the property.

The Supreme Court of Canada in Kerr v. Baranow explained that if a monetary award is to be handed over to the claimant, then the economic approach would be one of “value surviving.” This would essentially prove just if the claimant put money into a house that dropped in value over the course of the relationship. The “value surviving” approach would ultimately pay the claimant the proportion of what was put into the house and the house’s worth.

To learn more about common law spouses as well as the services provided by Krol & Krol, call 905.707.3370 today.

Beneficial Ownership and Family Property

The Court of Appeal in Schimelfenig v. Schimelfenig, outlines the difference between “legal ownership” and “beneficial” ownership.

In Schimelfenig, the issue was whether the home was owned by the husband – which would then be subject to division with his wife, or if it was owned by his parents, as they had transferred title of the home to themselves and their son in joint tenancy.

The Trial Judge neglected to highlight the difference between legal ownership and beneficial ownership. He ruled that the husband did not own the home (and therefore the home was not subject to division of property between him and his wife) because there was an abundance of evidence that his parents did not intend to give the home to their son as a gift. The transfer of ownership was clearly intended for estate planning purposes.

On appeal, the Court disagreed with the Trial judge in terms of his reasoning, however, agreed that the husband was not entitled to a portion of the home.

Unlike the Trial Judge, the Court of Appeal held that the husband was the legal owner of the property as his name was on title. However, as the evidence clearly conveyed, because the husband did not have any beneficial interest in the property whatsoever, he could not claim any portion of the land. Therefore, the property was not to be subjected to division between the husband and his wife, as it did not fall under the realm of “family property”.

All in all, the case clearly portrays how beneficial ownership interests can affect a family property claim.

To learn more about Beneficial Ownership and Family Property as well as the services provided by Krol & Krol, call 905.707.3370 today.

 

 

Is my spouse entitled to the value of property that I inherited in the event that we obtain a divorce? Do I need to draft a marriage contract to protect these items?

According to the Family Law Act, property (other than a matrimonial home) that is acquired, either as a gift of in the form of inheritance from a third party, even if it was received after the date of marriage, is property that will be excluded from the equalization process. This property must be existence on the date of separation. In addition, in order for the entirety of the inherited funds to qualify as an exclusion, it must have been kept separate and not co-mingled in a joint account.

Therefore, technically, the property that you acquired through inheritance is your property. Accordingly, your spouse is not and will not be entitled to the value of your inheritance. However, there is an exception to this general principle. In the event that the property you have inherited, or the gift that you have obtained, increases in value throughout your marriage, then your spouse may be entitled to half of the increase in value since the time of the marriage.

In the event that you want to protect any gifts or inheritance from a third party, either before or following the time of marriage, and you do not wish to have the increased value vulnerable to equalization, you may retain a lawyer to draft a marriage contract. A marriage contract can be pre-nuptual or signed before the wedding. Alternatively, it may be post-nuptial and signed after marriage. In this marriage contract, you are able to outline parameters that state that the property inherited is not to be subject to equalization under any circumstances. Furthermore, should you wish, you can instruct your lawyer to draft a contract stating that any increase in value in the property shall not be shareable property and shall not be subject to a division of net family property, should there be a breakdown in the marriage. In the event that you do that, you will not be required to share the increase in value with your former spouse.

For more information on equalization and exclusions, get in touch with Krol & Krol at 905.707.3370.

What is the preservation of property in family law?

Individuals in a family law case may have valid concerns their spouse will hide property or deplete their assets. Your family law attorney has many different tools that he or she can use to protect property in the context of a family law dispute.

Under section 12 of the Family Law Act, a court may order that property owned by either of the spouses is to be preserved during the litigation. A court may make a final or a temporary preservation order.

Preservation can have many different meanings. For example, the court can, among other things:

  • Preserve a specific asset so that it may not be sold or encumbered;
  • Freeze bank accounts so that no-one is able to deal with them until further court order;
  • Make an order pertaining to the safekeeping of property.

If you are concerned about preserving your property in your family law case, contact an experienced family law attorney at Krol & Krol today.

My ex spouse left behind many possessions when permanently moving out of the residence. According to Ontario family law, how do I properly go about disposing of these items?

It is common for separating individuals to want to rid themselves of the constant reminders of their ex, and therefore, to want to dispose of the remainder of their ex’s items that the ex has left behind in the residence. Based on Ontario family laws, it is, however, strongly advised that you not do so.

Though the reasons behind doing so may be understandable, both for practical and emotional reasons, especially once your ex spouse has permanently moved out of the residence, Ontario family law does not permit you to simply go ahead and get rid of their property. Ontario family law governs specific parameters under which you may go about this process.

If you fail to abide by these Ontario family laws, you may be held accountable for returning these items to your ex spouse. It is possible that you may be responsible for replacing them in the event that you cannot produce them.

According to Ontario family law, you ought to provide your ex spouse with significant notice to retrieve their items so that they may make the proper arrangements to do so before you go ahead and get rid of them. Your ex spouse ought to be granted a fair opportunity to retrieve the items before you are considered to be within your right to dispose of them.

Therefore, it is strongly advised that you provide your ex spouse with a notice, in writing, of when you are planning on getting rid of the items if he or she does not retrieve them. It is imperative that this notice provides him or her with a reasonable amount of time to retrieve the outlined items before you proceed to get rid of the items on your own.

If you have given your ex-spouse a written notice with an outlined date, and he or she has yet to come retrieve the items by the designated date, then you may be permitted to dispose of the items accordingly.

It is further advised that you retain a copy of the written notice that was sent to your ex spouse, along with any receipts substantiating the method by which you got rid of the items. For example, if you donate the clothing, the date upon which you donated the clothing can be provided by the charity via a receipt. This only further proves that the clothing was in your possession up until the designated date written on the notice.

Contact Krol & Krol at 905.707.3370 for more information on how you should go about disposing of an ex spouse’s items that remain in your possession.

What is an unequal division of net family property

The division of net family property and establishing how much money each spouse is legally entitled to upon the dissolution of a marriage is referred to as the “equalization of net family property”.

According to the Family Law Act, the formula in determining one’s net family property requires a calculation of one’s net asset position on the date of marriage and on the date of separation. The basic parameter upon which the “equalization of net family property” is established as follows:

The first step is to calculate each party’s net asset position on the date of separation. It is then necessary to subtract any legally permitted exclusions. Legally permitted exclusions may include but are not limited to, inheritances, specific kinds of gifts, as well as items that both individuals have agreed to keep excluded from the division of property.

It is then necessary to calculate each party’s net worth at the date of his or her marriage.

The net worth of each spouse the day that they got married is then subtracted from each of their net worth on the date of the separation.

Finally, the party with the higher net family property pays the party with the lower net family property one-half of the difference between their respective net family properties.

The above-noted scheme outlines the basic formula upon which an equalization payment is determined in Ontario. There are times, however, when other factors may affect the equalization of the net family property.

The legal system takes into consideration situations whereby equal division of the net family property would be unfair given particular circumstances. The threshold required in order to establish an unequal division of net family property is a high one. Specficially, if an equal division is unconscionable, an unequal division may be ordered by the Ontario Courts. With that being said, there are situations whereby Ontario Courts will grant one spouse an amount that is more or less than half the difference between the net family property.

These circumstances include but are not limited to:

1. When a spouse neglects to inform the other spouse of debts or other liabilities that existed at the date of the marriage;

2. When a spouse incurs debt recklessly;

3. When a spouse intentionally depletes his or her net family property;

4. When there is some form of written agreement between the parties that outlines another agreement when it comes to the way in which they intended on dividing their net family property;

5. When the amount of money one spouse is considered legally entitled to is disproportionately large compared to the years that they have lived together.

Call 905.707.3370 to book a consultation with one of our lawyers to discuss your specific situation and to canvass whether or not your case may be a candidate for an unequal division of net family property.