Archive for the ‘ debt ’ Category

What’s in a Name?


Plenty – so learn how to protect your family assets!

One area of family law which does cause considerable confusion and frustration to clients, and family law lawyers alike (including me), involves trying to determine what assets are family assets, and what liabilities are family debts.

Why is it so darn important? Because when married parties separate there is a presumption (albeit rebuttable- meaning it can be overturned in certain circumstances) that each party will share equally in the family assets.  

What is often not so well understood (or received) is that the same presumption also applies to family debts. Also, do not assume that just because an asset or debt is only in one name that this means that it need not be shared.

A family asset is generally any asset (whether in one name or joint) which has been used, or enjoyed, for a family purpose. Sometime it can be easy, such as the family home, or joint bank account.

Also note some assets are deemed at law to be family assets. The most common are RRSP’s, employment pensions, and CPP benefits.

But what about an inheritance received by one spouse prior to the separation, or a business owned, and operated by, by one spouse? While any determination will depend on the unique facts of each case, the more readily that an asset has been used, during the marriage, to provide financial support, or security, to the family, the more likely it will be considered a family asset.

So what’s my advice if you and your spouse are separating, and you’ve accumulated family asset or liabilities, or you’re simply not sure whether or these qualify as family assets or family debts? Don’t assume anything until you’ve received some legal advice! Otherwise you could either be giving up, or giving away, a great deal of money, for no valid reason.

In addition, it’s also an excellent idea, for practical reasons, to keep all records and statements from the date of separation. Such records could include bank accounts, RRSP statements, and credit card, mortgage, and Line of Credit statements. This is the best way to ensure that there can be a fair, and accurate, division of both assets and debt.

And if the thought of collecting all these records sounds unappealing, just remember, without such documentation, neither the law nor any lawyer can do you any good!

KitchenTableTalk – No.2 Question

The second most frequently asked question I am asked by any family law client is, “Just how much is my spouse entitled to in our divorce?”.

It’s a great question, although one with some legal twists and turns. I begin my answer by informing my client about the general legal principle (sometimes referred to as a general presumption) which applies when parties separate and divorce. Namely, both parties are entitled to an equal division of family assets.

Of course it helps to first have an understanding of what is a family asset. A family asset is typically any asset which is, or has been, used or enjoyed for a “family purpose”. This usually includes the family home, vehicles, recreational properties, etc. However, some assets have been defined as family assets regardless of any family purpose, these include such items as RRSP’s, and employment pensions.

So now that you know what are the usual family assets, there are some notable exceptions to the 50/50 split of family assets. One of the most important is the duration of the relationship, not necessarily just the length of the marriage, since it could encompass a period of co-habitation. For what are considered very short marriages, ie less than five years, courts will consider the respective contributions (including financial, household, and child rearing contributions) of each party, before deciding an equal split is fair. For example if one party (spouse A) had amassed significant assets before marriage, in the absence of equivalent financial contributions from the other spouse (spouse B), or other household or child rearing responsibilities, there is a possibility that  a court could decide to re-apportion the assets in favour of spouse A.

All of this means that whether you identify as spouse A or B you should not simply agree to any specific division of family assets, without first receiving some legal advice from an experienced family lawyer. Otherwise, it could become the costliest mistake you’ll ever make!

Until Debt Do Us Part

It’s a sensitive, potentially awkward, and emotionally charged, topic of conversation, which eventually lands many unfortunate couples in family court. Of course, I’m referring to the hot button issue of family finances, specifically, family debt.

But rarely does the matter of family debt become more problematic and contentious than when couples separate or divorce. The reason is simple.

Everybody wants to claim their share of the assets. Nobody wants to assume their share of the family debt.

It reminds me of the expression, “Success has many fathers, while failure is an orphan.” Family debt has definitely been considered an orphan, but as the Supreme Court of Canada, recently decided, at least in some situations, its days as an orphan have come to an end.

The case in question involved Wayne and Malka Stein, whose 12- year marriage ended with two children, an equal division of $1.2 million in assets, and an order of spousal support. At issue was responsibility for the future tax liabilities associated with Mr. Stein’s tax` shelters, the extent and timing of which were not ascertainable at the time of trial. Nevertheless, the trial judge ordered, that such future “contingent liabilities” would be shared equally by both Mr. and Mrs. Stein, “on an “if and when” basis, since they both benefited from them.”

However, the British Columbia Court of Appeal disagreed with the trial decision. It did so, because in its view, the Family Relations Act “precludes the kind of “freestanding” division of debt”, made by the trial judge. Further, because the “speculative nature” of the liability precluded a “rational adjustment of the property to account for the potential liability”, at the time of trial, the Court ordered Mr. Stein to be solely responsible for any liability.

Mr. Stein appealed to the Supreme Court of Canada. In a relatively short,   nearly unanimous decision, Canada’s highest court dismissed the legal arguments raised by the Court of Appeal. In essence, the Court decided, simply because the parties were unable to calculate the amount of the future liability at the time of trial, did not mean that such liability could not be divided between the spouses. It was a matter of basic fairness, as well as recognition that any marriage is a joint venture in every sense. As the Court opined, “fairness requires that both assets and debts, even those that cannot be precisely valued at the time of separation be considered upon the breakdown of a marriage, in recognition that spouses jointly contribute to not only the accumulation of assets, but also to debts incurred for family related costs.”

As a consequence the Court ordered that both Mr. and Mrs. Stein share responsibility for such liabilities, provided, if the impact of such future liabilities resulted in any unfairness, the legal door remained open to make appropriate adjustments.

So if “debt” rather than “death” does you part at least it’s somewhat re-assuring (or not) to know, that your promise “for better or worse” may have far more significance than you ever imagined.