PROPERTY DIVISION

• when entering a new relationship or thinking about separation, it is important to know your rights, know what you are entitled to if the relationship ends… possible to plan ahead and protect your rights… when entering a relationship

• not as easy as people think

• not necessarily 50/50 division/ many factors to consider

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• s. 5 of the FLA says that the provisions wrt property division is only wrt“spouses” which are married / FLA property division not relate to CL spouses

• FLA deals with married spouses / no fixed rules govern the division of property for CL spouses

• CL spouse’s property division based on concept of “joint family venure”

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• For married spouses - upon separation (or the death of a spouse) married spouses (or the surviving spouse) are entitled to a division of property acquired during the marriage

• Property is divided based on ownership and the value of the property

• The property itself is not divided

• Basically, each party determines his / her net worth (assets less debts) as of the date of marriage and the date of separation

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• Whoever has the greater difference in his / her net worth from the date of marriage to the date of separation (Net Family Property), will owe the other party an equalization payment / ONE-HALF of the difference bw the parties NFP / the person with the higher NFP will pay the person with the lesser NFP / it is a debt owing by one spouse to the other spouse

• The purpose is to equalize their respective differences in the increase in their net worths, from the date of marriage to the date of separation

• The payment is called an equalization payment

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• eg. If the Husband NFP is $100k (increase in his net worth from the DOM to the DOS) and the Wife’s NFP is $50k (increase in her net worth from the DOM to the DOS) – what is the equalization payment owing from the Husband to the Wife?

• $100k - $50k = $50k/2 = $25k – The Husband pays the Wife $25k so that each person leaves the marriage with an NFP or $75k

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Steps To Determine NFP

• What property did you own on the DOS / less the debts you owed on the DOS / less excluded property (gifts, inheritances etc.), / less property owned on the DOM / less value of the debts owed on the DOM = NFP

• Determine which spouse has the higher NFP

• Larger NFP less small NFP / 2 = Equalization payment

• EP – what one spouse pays the other spouse to equalize their NFP

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• A judge is not going to examine all of the transactions during the marriage, unless the “transactions” were harmful or unconscionable (eg. Gambling, drugs etc.)

• ie – we had a case where one spouse, gambled a large amount of the parties assets and lost, it was very offensive to the court and it was something the court considered in evaluating the property claim of the gambler

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• The court first determines the value of a parties assets and debts on the date of marriage and then determines the value on the date of separation – the fluctuation of the value of the asset or the parties during the marriage (unless there was fraud) during the marriage is not important/

• It is a “snapshot in time” - the date of marriage and the date of separation

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• Don’t have to have one spouse move out of the house in order for their to be a separation

• Only once there is a permanent separation, does it trigger the division of property

• Physical separation is one part/ but if still go to counseling or still have an ongoing relationship, may argue that there is not a separation

• Or may be living separate and apart, and just bc you go on a vacation with your spouse and kids does not necessarily mean that there has been a reconciliation

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Tests For Date Of Separation

• Are they having sex / Are the parties living separate lives / are they cohabiting / do they cook and clean for each other / go out socially / do people know that they are separated / - all kinds of indicia

• Important bc sometimes the values of assets can fluctuate on the date of separation

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• Property – what is property?

• FLA has a very broad definition/ “any interest, present or future, vested or contingent, in real or personal property”

• Includes a ‘spouses right under a pension plan that has vested

• Eg - Land, bank accounts, cars, jewelry, stocks, bonds, shares, mortgages, AR, and anything that has value

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• NFP defined as the value of all of the person’s property on the date of separation (with the exception of some property – excluded property to be discussed) less the spouse’s debts and liabilities as of the date of separation less net worth of party on the date of marriage (but not considering the value or mortgage of the matrimonial home, if owned on both the date of separation and the date of marriage – we will look at mat home soon)

• Only look at the value of assets/ debts as of these two dates: date of marriage and the date of separation

• Ups and downs of a parties finances during the marriage is essentially ignored

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Matrimonial Home

• The definition of a matrimonial home is a property that one of the spouse’s has an interest in (has to be owned somewhat by one of the spouses… , can’t be owned solely by parents)… and was “ordinarily occupied” by the spouses on the date of their separation (FLA – s. 18)

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Can you have more than two matrimonial homes?

• Spouses can “ordinarily occupy” more than one property / eg. a cottage and a house – can have two matrimonial homes

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• Bc the matrimonial home is considered special property, you cannot deduct the value of the matrimonial home owned as of the date of marriage from you NFP, if it is the same residence that you owned as of the date of separation / also don’t consider mortgages or debts associated with the mat home as of the date of marriage if it is the same residence as of the date of separation / only consider the value of the matrimonial home as of the date of separation don’t look at DOM value in determining NFP of party / therefore, if the house is worth $500k on the date of separation (assuming no mortgage) but was only worth $300k on the date of marriage, you would share $500k with your spouse not the increase in value or $200k

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Cost of Disposition / Contingent Liabilities

• Court of Appeal decision – Sengmueller v. Sengmueller – The court held that must look at the net value of the asset as of the date of separation/ costs of disposition must be shared bt the spouses - but is it dependent on the nature of the asset and the evidence as to when the asset is going to get sold / if the taxes or cost of disposition are reasonable foreseeable when the asset is sold, the court should consider the present value of the tax debt in determining the value of the asset

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Excluded Property

• Some property is not part of a party’s net family property/ it is considered excluded property

• Cannot be a matrimonial home

• Most important is a gift or inheritance from a third person that was acquired during the marriage and can trace this property into property existing as of the date of separation (must be AFTER the wedding)

• Tracing is very important – say inherit $1 million during the marriage, but spent it and $ got mixed with other accounts, can’t really trace it to the date of separation? – no exclusion unless can tract the monies to an asset existing as of the DOS

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Unequal division

• Usually determine the parties NFP and pay an equalization payment from one party to the other party in order to equalize their NFP

• What if it would be unfair to equalize the parties NFP/ not fair to have one party pay the other an equalization payment?

• Possible that the court could say that it would be “unconscionable” to divide the difference in the parties NFP equally

• Very high threshold/ “shocking to the conscience of the court” (Levanv. Levan) – not done often

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Marriage Contract

• Parties have certain rights and obligations wrt division of property pursuant to the FLA

• What can a marriage contract do? What is the purpose?

• All rights can be modified by way of a marriage contact/ any provision wrt division of property can be changed if the parties agree

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• Can they also say that bc the other spouse has no interest in a house being brought into the marriage if they separate and it is a matrimonial home? Yes – can contract out of those provisions of the FLA

• Can they say in the marriage contract that if we separate, and you live in the house that I brought into the marriage, you must leave immediately? No – the only thing you cannot contract out of is the possession of the mat home/

• Can address custody/access issues in a marriage contract – not binding on the court/ support issues are also not binding and can be challenged1

• In order to have a valid marriage contract, must be signed, witnessed, in writing, must be done voluntarily and with full financial disclosure/ also important to have ILA so that everyone understands his or her rights

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• When can a court set aside a marriage contract? One spouse lied about his/her financial situation when the agreement was made/ one side was pressured to sign the Agreement/ you did not understand the agreement when it was signed/ the agreement is extremely unfair

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