Property Division During COVID-19 In my previous post, I touched on the issue of changing support obligations in light of the pandemic. More and more, separating spouses are wondering how property issues will be dealt with in light of the pandemic, particularly as assets are dropping in value after separation. In Ontario, we follow an “equalization” regime under the Family Law Act. Broadly put, this means that spouses share in the increase of their net worth for the duration of their marriage. Generally, the spouse who had the greater increase of net worth during the marriage would pay the other spouse one half of the difference. For example, if Husband’s net worth grew by $100,000 during the marriage, while Wife’s net worth grew by $50,000, then Husband would owe Wife and equalization payment of $25,000 (which is half the difference between $100,000 and $50,000). Equalization is explained more fully here. For now, it is important to understand that two dates become very important: the date of marriage, and the date of separation. Both spouses’ net worth as of these dates become crystallized, which determines the figures used to calculate the equalization payment owing. Generally, fluctuations in the value of assets following separation are not considered, which could lead to unfair results. Some examples: Husband is an employee at a publicly-traded company but receives company shares as part of his compensation package. At the date of separation (pre-pandemic), he solely-owned shares worth $1,000,000. Following the pandemic, the value of the shares dropped by 10%, which may continue to plummet. This provides for a $100,000 reduction of the husband’s net worth post-separation. However, following a true “equalization” would provide that any decrease in value post-separation is not shared between the parties. As such, Husband would be accountable for the entirety of his equalization payment, while still absorbing the decrease of his net worth post-separation. Wife solely owns a retail store in downtown Toronto. At the date of separation (pre-pandemic), it was worth $500,000. In light of the pandemic, she is unable to pay her overhead costs and must close her doors. As a result, she is stuck with a business that she will struggle to sell. Again, a true equalization regime would have no regard for any post-separation fluctuations in value, leaving Wife accountable for an equalization payment that would otherwise be owed to her Husband. In either scenario above, the spouse owning the assets could look to section 5(6) of Ontario’s Family Law Act to request an “unequal division of net family properties” to avoid absorbing the entirety of the loss. Even then, the test under section 5(6) is stringent. The moving party would need to demonstrate that following a true equalization regime would “shock the conscience of the court”. For more information about property division or any other family law related issue, please contact the author of this blog post, Mason Morningstar at mason.morningstar@devrylaw.caor 416-446-3336. “This article is intended to inform. Its content does not constitute legal advice and should not be relied upon by readers as such. If you require legal assistance, please see a lawyer. Each case is unique and a lawyer with good training and sound judgment can provide you with advice tailored to your specific situation and needs.” By Fauzan SiddiquiBlog, COVID-19, Family LawMay 5, 2020September 30, 2020
Do I Have to Give Half Our House to My Ex-Spouse Even Though I Paid for it Myself? This blog is co-written by our former articling student, Janet Son. With the rising costs of housing in the GTA, the question of what happens to property after divorce can loom heavily on those who enter into marriage with significant assets. In Ontario, the Family Law Act, R.S.O. 1990, c. F.3, (the “FLA”) is the legislation that governs the property rights of separating spouses including the “equalization of net family property”. Generally speaking, the purpose of equalization is to calculate the value of assets accumulated during the course of the marriage and to have it divided equally between the spouses, subject to exclusions such as gifts and inheritances. However, it does not actually change the ownership interest of the property itself. There are special rules that apply to the matrimonial home which is property where at the time of separation was “ordinarily occupied by the person and his or her spouse as their family residence”. Even if only one party owned the matrimonial home prior to marriage, the full net value of the home is equalized. This leads to the question: is it worth it to get a marriage contract (also known as a pre-nuptial agreement) to protect your property that you purchased prior to marriage and are now using as the matrimonial home? In Martin v. Watts, 2018 ONSC 2622, clauses in the parties’ marriage contract regarding the division of their matrimonial home upon relationship dissolution were upheld. The wife in this case used her assets to purchase a property that would become their matrimonial home. The parties entered into a marriage contract in 1990 that stipulated if the parties separated, the wife would receive a return of her cash contribution plus 25% free of any claim by the husband, with the balance divided equally. This provision would apply when there was a sale or buy out of the matrimonial home. The husband brought a motion to have the matrimonial home sold and for him to be given carriage of the sale. He relied on s. 52(2) of the FLA, which provides that “a provision in a marriage contract purporting to limit a spouse’s rights under Part II (Matrimonial home) is unenforceable.” However, the motion judge upheld the marriage contract and reminded the husband that the FLA does not actually create ownership rights so he does not have the authority to force the sale of the home. As long as the “intent of the contract is sufficiently clear, a domestic contract may provide an exemption from the equalization provisions of the legislation”. In other words, a carefully worded marriage contract could protect your property from equalization even when it is the matrimonial home. For more information on the specific wording required, speak to certified family law specialist Katelyn Bell on 416-446-5837 “This article is intended to inform. Its content does not constitute legal advice and should not be relied upon by readers as such. If you require legal assistance, please see a lawyer. Each case is unique and a lawyer with good training and sound judgment can provide you with advice tailored to your specific situation and needs.” By Fauzan SiddiquiBlog, Family LawNovember 19, 2019July 5, 2023
I Owned the Home Before We Married – Why Does My Spouse Get a Share of It? We are all familiar with the skyrocketing price of homes in Toronto and the surrounding area. It is not a simple feat to purchase a home – it requires a lot of hard work and obviously, money. Picture this: you work your way through school, spend years in full-time employment, finally earn enough income to secure a home, make mortgage payments on your own for several years, meet your partner, marry said partner, separate from said partner, and then you lose a large portion of equity in your home to that partner. For many, this is an unfortunate reality and the reason why is something our clients should be aware of, given that the family home is most often a couples’ most significant asset. In Ontario, there are special rules in respect of the treatment of the matrimonial home upon marriage dissolution. The Family Law Act defines a “matrimonial home” as follows: “Every property in which a person has an interest and that is or, if the spouses have separated, was at the time of separation ordinarily occupied by the person and his or her spouse as their family residence is their matrimonial home.” It is important to note that a couple can have more than one matrimonial home. A cottage for example, ordinarily occupied by both spouses, can be a matrimonial home. A hunting cabin only ever used by one spouse on the other hand would not be considered a matrimonial home. Under the law in Ontario, a couple’s property is not divided upon separation, but rather, the value of that property and more specifically, the growth in value of property that spouses share is divided. What this means is that if the title to the matrimonial home is in your name (perhaps you owed it before the marriage), it stays in your name (subject to some claims your spouse could make if he or she made significant contributions to the property), but your spouse has a right to claim a share in the value of a matrimonial home as part of an equalization payment dividing property. Absent a marriage contract, the entire equity in a matrimonial home is always included in the value of assets that married spouses share. With almost every other type of asset, spouses only share in the growth in value during the marriage. Take for example an art collection – purchased by both spouses – this is something you and your partner would share the wealth in. The matrimonial home on the other hand is not. Section 5(2) of the Family Law Act does not allow a spouse to get any credit for bringing a property into the marriage if that property was a matrimonial home on the date of separation. So, without a marriage contract, a couple will share whatever value is in the matrimonial home. Unless the matrimonial home is jointly owned, there is no right to “half” the home but instead, a right to have whatever equity lies within the home included in property/asset division. In terms of possession of the home, both spouses have an equal right to possession pursuant to section 19 of the Family Law Act. What this means is that one spouse cannot unilaterally exclude the other from the matrimonial home, even if they own it. A spouse (whether on title or not) can also apply to the court for exclusive possession of the matrimonial home (s. 24 of the Family Law Act). A court order for exclusive possession has the effect of excluding a spouse from the property for a period of time as determined by the court. If you are planning on getting married and own a home, you may want to consider putting protections in place and these protections would come in the form of a marriage contract. A marriage contract – entered into in anticipation or marriage or after a marriage has already happened – can exclude the matrimonial home from a spouses net family property. This would have the effect of the spouses not sharing in the equity in the home on date of separation. If the marriage contract is done properly, which requires the help of a lawyer, then judges usually think that giving a spouse credit for bringing the home into the marriage is fair. For more information regarding divorce, property division, marriage contracts or any other family law related topic, contact Toronto family lawyer John Schuman at 416-446-5080 or John.Schuman@devrylaw.ca. “This article is intended to inform. Its content does not constitute legal advice and should not be relied upon by readers as such. If you require legal assistance, please see a lawyer. Each case is unique and a lawyer with good training and sound judgment can provide you with advice tailored to your specific situation and needs.” By Fauzan SiddiquiBlog, Family LawMarch 5, 2019July 5, 2023
I’m Getting a Divorce, What Are My Rights to the Family Business? When divorce is contemplated by either one or both spouses, often it is time to start thinking about the division of assets. This could include the matrimonial home, financial accounts, earnings accumulated during the marriage and as one might expect, retirement accounts also. That said and unsurprisingly so, countless married couples who in addition, become business partners, do not anticipate separation and as a result, make no formal arrangements concerning their business should the unexpected happen. Unfortunately, the lack of forward-thinking from the onset can become incredibly problematic, and in some cases subjecting the business to stagnation, as the breakdown in communication and lack of mutual agreement occurs between the two parties. So, what happens when you finally make the decision to divorce? – People often assume that divorce typically means all assets are divided equally, 50/50. Obviously, there are exceptions to this notion – for instance, if a property is in joint names and owned by each party as joint tenants, then indisputably each is entitled to half of the property in question. However, a jointly owned business is somewhat more complex, as generally, the resolution is rarely as straightforward as the previous example. There are a number of scenarios to which can be presented to married business partners: – Complete dissolution of the business and splitting the proceeds – Continue to jointly manage the business – An elected spouse keeps the sole proprietorship of the business and purchases the remaining shares. As you can imagine, this can be a tough decision to not only decide upon but one that both parties should endeavour to ultimately agree on together. Less challenging if the separation is amicable, which is why at Devry Smith Frank LLP, we understand the need for a comforting experience and the importance of promoting a smooth transition. Furthermore, the complexities don’t often halt there. – Outside the obligations to yourself, there are obligations to your employees, clients, suppliers, creditors and anyone else who may be considered a business shareholder. It is essential to seek guidance from experienced family and corporate legal professionals, who have extensive skills in helping to decipher both the family and business aspect, thus attaining a fair settlement for both parties. Your family lawyer will also be of assistance in improving your knowledge on your responsibilities and entitlements throughout the process. If you are thinking about dissolving a marriage and a business partnership simultaneously and you are concerned about what will happen to your family business, talk to one of our family lawyers today in our Toronto office location. For more information on how we can assist, please contact our office online or directly on (416) 449-1400 and schedule a consultation today. “This article is intended to inform. Its content does not constitute legal advice and should not be relied upon by readers as such. If you require legal assistance, please see a lawyer. Each case is unique and a lawyer with good training and sound judgment can provide you with advice tailored to your specific situation and needs.” By Fauzan SiddiquiBlog, Family LawDecember 20, 2018June 15, 2020
Can My Parents Take A Condo From Me That They Purchased Under My Name? Family Lawyer John Schuman was asked the following question: My parents purchased a condo under my name, is there a way for them to legally take the condo back? I live in Ontario, Canada. Due to some conflicts with my parents, they are claiming that by law they can force me to give back the condo to them (or force me to owe them the condo price) since they paid for it, anyone know if this is true? The condo was paid in full and it is under my name only. John’s Answer: The law does not help your parents at all if they have nothing registered against the condominium. At law, it is yours and they have no legal claim. However, Judges in Ontario can also apply the “Principals of Equity.” The Principals of Equity are more fully described in this podcast on Common Law Couples and Property Division. This is not because you and your parents are considered “common law” but because common law have no right in law to each other’s stuff, but they can make claims in equity. Your parents would say that you are the legal owner, but they are the beneficial owner – or the owner in equity. This means that nobody intended that you would be owner of the condo, but instead the intention was that you would hold the condo in “trust” for your parents and they would always be the “real owners” even though title is registered in your name. To succeed, they have to prove that it is more likely than not that this was the case and that they did not intend to give you the condominium as a gift. You will need some evidence that they did intend to make the condo a gift to you. If your parents cannot show that the property is a gift, or there is some ambiguity, they can also try to make a claim for “unjust enrichment.” Essentially there is claim it is unfair that you should profit from getting the condominium because they have suffered a large, unjustifiable, loss. This is explained more in that podcast. To summarize they need to prove to the judge: you received a benefit your parents suffered a loss that corresponds to the benefit (i.e. they are out the money from buying the condo) there is no “juristic” reason (meaning a reason in law), for you to get the benefit and them to suffer a loss. If you have been looking after the condominium, and paying the associated expenses without their help, it is hard for them to succeed because: it shows that they did not intend to be the owners you would suffer a loss and they would receive a benefit if they got the condo back and so they would be “unjustly enriched” – assuming you have paid more for those expense than you would to rent the condo from them. The Principals of Equity are tricky. Little things can have a big effect on those cases (again that is all explained in the podcast). So, it would be best for you to speak about the specifics of your case with a lawyer who knows about these kind of cases. You can get a lot more information about Ontario Family Law issues, including property division, support, and most other common family law issues by downloading this $9.99 e-book for Kindle, Kobo, or iPad/iPhone/Mac or ordering the paperback version. But, to keep out of trouble, it is always best to speak with a top family law lawyer. John Schuman is a Certified Specialist in Family Law. He is the partner managing the Family Law Group at Devry Smith Frank LLP, a full service law firm located near Eglinton and the Don Valley Parkway in Toronto. Learn more about John! Call him at 416-446-5080 or 416-446-5847 or email john.schuman@devrylaw.ca Listen to the Ontario Family Law Podcast! “This article is intended to inform and entertain. Its content does not constitute legal advice and should not be relied upon by readers as such. If you require legal assistance, please see a lawyer. Each case is unique and a lawyer with good training and sound judgment can provide you with advice tailored to your specific situation and needs.” By Fauzan SiddiquiBlog, Family LawJanuary 19, 2018June 16, 2020
How is the Money from the Sale of a House Divided in a Divorce? Family lawyer John Schuman was recently asked this question: I bought my home in 1995 and it became the matrimonial home when i married my husband in 2009. I’m filing for divorce now and selling the house. Is the money from the sale of the house split 50/50 or will I receive a bit more being the original owner of the house? My husband is on the mortgage as well. Answer by John Schuman: When married couples separate in Ontario, the home (or homes – there can be more than one) that they live in on the day they separate gets special treatment in property “equalization” process. (Non-married or common-law couples may not divide property or may do it differently.) Those special rules may make it seem that matrimonial homes are divided “50/50”, but that is not actually how it works. The property division provisions of Ontario’s Family Law Act do not give married people any right of ownership over their spouses’ property or other assets. If title to the matrimonial home is in your name, it stays in your name, subject to some claims your spouse can make if he or she makes significant contributions to that property. Just being married does not mean spouses both own their home (or homes). Watch this video for more details on how Ontario Law divides the value of property, not the property itself, on separation. There are a number of special rights that attach to matrimonial homes (or homes). One is that neither spouse can kick the other out of matrimonial home, or secure debt against a matrimonial home, without the other spouse’s consent or a court order. The reason people think they share the equity in matrimonial homes 50/50 is that, absent a marriage contract, the entire equity in a matrimonial home is always included in the value of assets that married spouses share. With almost every other type of asset, spouses only share in the growth in the value during the marriage. However, section 5(2) of the Family Law Act does not allow a spouse to get any credit for bringing a property into the marriage if that property was a matrimonial home on the date of separation. So, without a marriage contract, spouses share whatever value is in their matrimonial homes. Spouses do not necessarily have to give their spouses “half the house” on separation. That spouse is entitled to stay in the house, and to have the equity included in property division, but, if a home is not jointly owned, there is not right to “half of it.” It is just included in the assets to be divided. So, if the spouse who does not own the matrimonial home has lots of savings or a pension to include in his or her assets to be divided, that may offset the value in the matrimonial home. If the spouse who owns the matrimonial home had a lot of assets (other than the matrimonial home) on the date of marriage, his or her increases in net worth may be less than the other spouse, which would mean the home would not be divided. The same may be also be try if the spouse who owns the matrimonial home has a lot of debt on separation may not have the increase in net worth that is necessary to owe the other spouse anything. But, in short term marriages, there is a real danger that a spouse can walk away being entitled to half the other spouse’s home. If the marriage was short, the couple may still live in the same house that one spouse brought into the marriage. In that case, the spouse with the house has to share half the value of the house because there were almost no changes in each spouse’s financial situation and so nothing to offset the value in the matrimonial home when the spouses “Net Family Properties” are “equalized.” Watch this video or listen to this podcast, for more on the dangers posed by the law of matrimonial homes. Note that that the special rights for matrimonial homes only apply between two spouses. Those rights regarding matrimonial homes do not apply to third parties, such as in-laws, landlords, business partners, or friends. A spouse has no right under Family Law to stay in a home owned by his or her in-laws or another landlord. You certainly do not become entitled to “half” of a matrimonial home that neither spouse owns. People who think they should have rights with respect to a property that is not owned by them or their spouse should speak to a lawyer to see if any other type of law might help. Before or after a marriage, spouses should never assume that the matrimonial home will just be divided 50/50 until they have each spoken to a lawyer to figure out how Ontario Family Law will work in their family’s situation. This is an area where making a mistake can cost hundreds of thousands of dollars. There may be things a lawyer can do to make things fairer – especially before a separation. But even after separation, there may be possibility of making the tricky legal arguments to adjust how property is divided either pursuant to section5(6) of the Family Law Act or the Principles of Equity. Obviously, there can be a lot of money involved in any marriage or relationship and that means there can be a lot at stake financially. Get the help of a lawyer immediately to avoid financial hardship. You can get a lot more information about Ontario Family Law issues, including property division, support, and most other common family law issues by downloading this $9.99 e-book for Kindle, Kobo, or iPad/iPhone/Mac or ordering the paperback version. But, to keep out of trouble, it is always best to speak with a top family law lawyer. By Fauzan SiddiquiBlog, Family LawAugust 30, 2017July 5, 2023
Am I Liable For My Ex-wife’s RRSP Losses? Toronto Family Lawyer John Schuman was recently asked the following question: Is there any case law that would show I am not liable for any of the following losses? When applying for a divorce, you must fill out a financial statement. Before we were married my wife had RRSP’s that were called labour sponsored funds. They subsequently lost 90% of their value after we were married. I contend that I should not be liable for any of these losses. Answer: On the breakdown of a marriage (but not a common law relationship), spouses “equalize” their assets and liabilities and share, with some exceptions, the growth in their net worth during the marriage. This video explains “Equalization of Net Family Property” in greater detail. Many separating spouses can feel that the equalization process can be unfair – particularly where one spouse has spent money on stupid things, gambled it away, is getting a windfall due to the division of the matrimonial home, or it has been a very short marriage. In these and other situations, dividing up all property “50/50” can seem unfair. Section 5(6) of Ontario’s Family Law Act does allow a Court (or Family Arbitrator) to deviate from the usual equalization of Net Family Property and divide the family’s wealth another way. It accommodates all of the scenarios above and a few others. However, the test that the Family Court (or arbitrator) has to use is not whether the normal “equalization” would be unfair. Section 5(6) says that to deviate from the normal equalization, the Court must be “of the opinion that equalizing the net family properties would be unconscionable.” “Unconscionable” is much more than just unfair. The case law says that it means that the usual result must be “shocking to the conscious of the court.” That is much more than just unfair. One spouse spending a lot of money on an affair is not enough. A spouse spending too much is not enough. Justice Jennings put it this way: The result must be more than hardship, more than unfair, more than inequitable. There are not too many words left in common parlance that can be used to describe a result more severe than unconscionable. Specifically on the issue of investment losses, the Courts have held that improvident (stupid) investing is not enough to justify an unequal division of net family properties. The investment must have been made recklessly or in bad faith. That means the spouse must have known, or should have known, that the investment would become worthless. Risky investing is not enough. The spouse must have acted deliberately to lose money or known that he or she was likely to lose money. That can definitely seem unfair – especially when one spouse is a conservative investor and one spouse is a high risk investor, or where one spouse’s savings have done really well and the other spouse’s investments have done poorly. But, fairness is not the test. Different opinions on finances can cause stress in, or event the end of, a lot of marriages. Where spouses have significant differences of opinion about money, they should consider getting a marriage contract. Spouses can get a marriage contract at any point during the marriage. They can keep a marriage together if one spouse wants to do something risky and the other one wants financial protection. This video explains how to protect yourself and save your marriage with a marriage contract. But, if you are separated now, it is likely too late for a marriage contract, and you have made one of the common family law mistakes. You should speak to an excellent Family Law Lawyer as the only way to correct this may be through spousal support, as section 15.2(6)(a) of the Divorce Act allows a judge to address the economic consequences of the marriage and its breakdown through spousal support. That can be through either awarding spousal support or reducing an amount of spousal support to reflect how the marriage affected the spouses financially. You can get a lot more information about Ontario Family Law issues, including support and property division, and most other common family law issues by downloading this $9.99 e-book for Kindle, Kobo, or iPad/iPhone/Mac, or ordering the paperback version. But, to keep out of trouble, it is always best to speak with a good family law lawyer. John Schuman is a Certified Specialist in Family Law. He is the partner managing the Family Law Group at Devry Smith Frank LLP, a full service law firm located near Eglinton and the Don Valley Parkway in Toronto. Learn more about John! Call him at 416-446-5080 or 416-446-5847 or email john.schuman@devrylaw.ca Listen to the Ontario Family Law Podcast! “This article is intended to inform. Its content does not constitute legal advice and should not be relied upon by readers as such. If you require legal assistance, please see a lawyer. Each case is unique and a lawyer with good training and sound judgment can provide you with advice tailored to your specific situation and needs.” By Fauzan SiddiquiBlog, Family LawJune 30, 2017June 22, 2020
