Family Law

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Family Law

• Business 4099
• Personal Financial
• Planning

02/17/98
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K. Hartviksen
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Introduction

• Social and economic changes in Canada today have
  forced considerable changes in the way we view
• Family
• Spouse
• Marriage
• It is important that you understand government
  jurisdiction over these matters and the rights
  and responsibilities of people in these
  relationshipshow the relationships may be
  constituted and how they may be dissolved.

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Important Terms

• Divorce Act
• FLAs Family Law Acts
• Separation agreement
• Divorce
• Annulment
• Family
• Marriage contract
• Alimony
• Matrimonial Home

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Spousal Couple

• Any two persons, same gender or opposite gender,
  who are living in a conjugal relationship,
  regardless of whether they are married.

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Spouse

• The definition can vary

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Divorce Act

• Federal statute
• Governs all divorces in Canada
• Grants the court the power to make orders on all
  subjects relating to marriage dissolution except
  one DIVISION OF FAMILY PROPERTY.
• A spousal couple is only a family under this act
  if they are legally married. If a marriage does
  not exist, then you cannot terminate it under the
  Divorce Act.

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Family Law Acts

• Provincial Acts
• Deal with division of property and many other
  aspects of marriage breakdown.
• Family Law Acts are now being amended to reflect
  changes in the Federal Definition of marriage.

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Family

• Any grouping of persons whose affairs are so
  closely related that they plan their personal
  financial affairs together.
• May be
• Single person
• Spousal couple (same gender, opposite gender)
• Single parent grouping
• Other grouping of more distantly related
  individuals

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Separation Agreement

• A contract between spouses in which they agree to
  live separate lives and set various conditions.
• Governed by contract law.
• Separated spouses are still married.

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Divorce

• Formal, legal end to a marriage
• Governed by federal courts
• Granted by a court upon application by a
  petitioner.

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Alimony

• Old term used to describe an allowance a man paid
  to his former wife for her living costs, but he
  had to pay it only if he had been guilty of
  adultery, cruelty or desertion.
• Now called spousal support.

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Spousal Support

• Means that in the event of a marriage breakdown,
  each spouse has an obligation to assist the other
  spouse financially, to the extent that support is
  needed and can be afforded.

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Marriage

• Unlike other contracts, marriage confers upon the
  parties a special status prescribed by law.
• Marriage may be a contract based on consent but,
  unlike other contracts, it is public in nature
  and one in which the state has an interest.
• It has been defined historically as the
  voluntary union of a man and a woman to the
  exclusion of any other person during the
  continuance of that union.

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Jurisdiction for Marriage

• Under the British North America Act, 1867, the
  federal government is given legislative
  responsibility for Marriage and Divorce.
• Therefore, the provisions for marriage and
  divorce are uniform across Canada.

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Provincial Jurisdiction

• Each province has the responsibility for
  legislation with respect to the solemnization of
  marriage in the province.
• this has enabled the provinces to enact their own
  preconditions to the solemnization of a marriage
  and thus, there is some variation.
• All make provision for religious and civil
  marriage ceremonies and have drawn up a list of
  prohibited degrees of relationship called
  prohibited degrees of consanquinity.

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Common-Law Marriage

• The term is frequently used to describe a variety
  of relationships.
• To constitute a valid marriage at common law, it
  is not necessary that the marriage be solemnized.
  What is required is that there be an actual and
  mutual agreement and consent to enter into a
  matrimonial relationship, permanent and exclusive
  of all others.

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Annulment of a Marriage

• Is different and distinct from divorce.
• A divorce decree dissolves or terminates an
  existing, valid marriage on the basis of a state
  of affairs which has arisen since the marriage.
• An annulment or nullity decree declares that a
  marriage did not exist and that it was null and
  void on the basis of a state of facts existing at
  the time of the marriage.
• Void marriage is one which is regarded as never
  having taken place.
• Voidable marriage is a marriage valid until
  annulled by a decree granted during the life of
  the spouses.

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Voidable Marriage

• A marriage may be voidable because
• impotence of one of the spouses
• lack of consent
• non-compliance with statutory formalities

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Void or Voidable Marriages

• The determination of whether a marriage is void
  or voidable is important to the legitimacy of
  children.
• If no marriage existed (the marriage is void)
  there is no right to a division of property under
  provincial statutes.
• If the marriage did not exist, rights under the
  marriage could not be claimed.

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Marriage Contracts

• All jurisdictions allow marriage contracts.
• They specify the rights and obligations of the
  spouses on breakdown of marriage.
• Formal requirements for contract include
• the contract be in writing
• signed by both parties
• be witnessed.

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Maintenance and Support

• Legislative Jurisdiction
• Both federal and provincial legislation is in
  force with respect to maintenance or support
  payments.
• In matters of maintenance for divorced persons,
  or persons in the process of becoming divorced,
  federal legislation is paramount and provincial
  support legislation is subordinate.

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Maintenance and Support

• Spousal Support Payments
• Eligibility for Support Payments - in making an
  order for support under the Divorce Act the court
  takes into consideration the condition, means,
  and Needs and other circumstances of each spouse
  and any child of the marriage for whom support is
  sought including

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Maintenance and Support ...

• Spousal Support Payments
• Eligibility for Support Payments
• the length of time the spouses cohabited,
• the functions performed by the spouses during
  cohabitation, and
• any order, agreement or arrangement relating to
  support of the spouse or child.

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Three Models of Support

• There are three models of support recognized by
  the courts.
• Clean-break Model the objective here is to
  sever economic ties as soon as possible.
• Compensatory Model purpose is to compensate the
  economically disadvantaged
• Income Security Model is based on a Means and
  needs test and is predicated on obligations
  flowing from the marriage itself the obligation
  of economic support.

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Child Support

• Principles of Child Support Orders
• there is little confusion about the principles
  behind child support orders. They include
• that the child(ren) is (are) entitled to the
  marital standard of living or as close to that as
  possible, and
• thast that is so even if the payer spouse has a
  lower standard of living than was previously
  enjoyed.

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Child Support

• Joint Responsibility for Child Support
• it is the responsibility of both parents to
  support their minor children. Child support is
  awarded for a child who is
• under 16 years of age or
• is sixteen years of age or over and under the
  charge of a parent but unable, by reason of
  illness, disability or other cause, to withdraw
  from their charge or obtain the necessities of
  life.

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Remarriage

• The remarriage of either spouse affects the
  support payments.
• Spousal support payments usually stop when a
  receiver spouse remarries.
• The remarriage of the custodial parent may change
  the expenses for the children of the original
  marriage and this could be taken into account in
  the application to the court to reduce child
  support payments.

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Types of Support Payments

• Lump Sum Support Awards
• frequently made to allow the lesser income spouse
  to become independently established.
• Follow the clean break principle of spousal
  support and have an intuitive and emotional
  appeal to spouses who wish to sever their
  economic ties quickly and get on with their lives
  independently.
• Periodic Support Awards
• often indexed to the cost of living.
• Tax consequences are outlined in SEPARATION
  AGREEMENTS.
• Variation of Support Payments

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Income Tax Act Child Support

• Child support IS NOT taxable in the hands of the
  recipient (who is normally the custodial spouse)
• The paying spouse CANNOT deduct child support for
  income tax purposes.
• Tax efficiency
• Support is normally paid by the higher income
  spouse
• Lump sum payments are more tax efficient because
  of the INCOME from the lump sum will be taxed in
  the hands of the lower tax bracket taxpayer who
  will also be taking the various tax credits for
  dependents on their tax return.
• Lump sum payments become more efficient if paid
  directly to the child (only possible for children
  older than 18)

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Spousal Support

• Spousal support orders can be done under both the
  Federal Divorce Act and the provincial Family Law
  Acts
• The Divorce Act recognizes four objectives of
  spousal support
• Recognize any economic advantages or
  disadvantages to the spouses arising from the
  marriage or its breakdown.
• Apportion between the spouses any financial
  consequences arising from the care of any child
  of the marriage over and above any obligation for
  the support of any child of the marriage
• Relieve any economic hardship of the spouses
  arising from the breakdown of the marriage, and
• In so far as practicable, promote the economic
  self-sufficiency of each spouse within a
  practical period of time.

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Division of Property

• There is much variation in provincial legislation
  regarding division of property.
• In Ontario and P.E.I., the value of all property
  acquired during marriage is subject to
  equalization. (ie. A payment is made by one
  spouse to another to equalize the division of
  net assets received by each as the result of
  separation or marriage breakdown.)

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A Wifes Dower Rights

• The traditional Right to Dower at common law, was
  a wifes right to a life interest in one-third of
  all the real property in of which the husband had
  an ownership interest at any time during the
  marriage, except any property that was held in
  trust.
• Today women have rights to own and deal with
  their own property and dower rights are less
  important.
• In some provinces, dower rights still exist, but
  the widow is required to elect between her right
  to dower and her bequest under her husbands will.

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Division of Assets Acquired During Marriage

• Most provinces consider marriage a form of
  partnership and that each spouse is entitled to
  50 of the value of assets acquired during the
  marriage.
• The value of assets owned at the time of the
  marriage, is kept by the spouse owning them at
  the time of the wedding.
• The value of property gifted to one spouse by a
  third party is kept by the receiver of the gift.
• In most jurisdictions the increase in value of
  the property taken into the marriage is shared
  property.

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Non-family Assets

• Include assets not generally used by the family
  such as
• shares or indebtedness in private companies
• investment portfolios contributed to by one
  spouse
• rental property, provided the other spouse did
  not contribute substantial time or money to the
  asset.
• In jurisdictions where only family assets are
  subject to division, these non-family assets
  remain with the owning spouse, and neither the
  property nor the value is subject to division.

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Departures from Equal Sharing

• Statutory Provisions - some provinces provide
  that all property acquired during the marriage is
  subject to sharing or division. Others provide
  that only a limited category of family assets is
  subject to division.
• All provinces provide for departures from equal
  sharing of designated assets, but use of these
  provisions is more frequent in provinces that
  provide for sharing only a limited category of
  assets than in provinces that do not so provide.

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Discretion of the Court re Sharing

• The discretion of the court to allow unequal
  share of assets is affected by the following
  among others
• A Short Childless Marriage
• Unequal Contribution to the Marriage
• Inheritances taken into the Marriage
• Unreasonable Debts Incurred During the Marriage

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The Matrimonial Home

• In Canada a matrimonial home is a family asset.
• Whether or not legislation provides for a
  division of all asset acquired during the
  marriage or a restricted category of assets known
  as family assets, the matrimonial home is shared
  property.

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Possession of the Matrimonial Home

• Ownership and Possession
• the law recognizes that marital status itself
  provides an interest in the property.
• The right to remain in possession of the
  matrimonial home is personal against the spouse
  and does not give any title or interest in the
  land itself.
• All jurisdictions provide for a right to
  possession of the matrimonial home.
• This is often necessary when the spouse with
  interim custody of the children needs to remain
  in the home so that the children can continue
  their education in a stable setting.

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Restrictions on Possession

• Courts are reluctant to order exclusive
  possession of the matrimonial home unless
  circumstances require it. Such situations where
  this may be called for generally involve violence
  against the wife and/or children, or a situation
  so untenable that it has a detrimental affect on
  the children.
• There is no legislation in Canada under which a
  court will order a party out of a home at the
  request of the other party. Unless there are
  circumstances where a court deems that continued
  residence under the same roof is a danger, it
  will not intervene to force one spouse to leave
  the matrimonial home.

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Restrictions on Disposition

• Most provinces restrict the disposition of a
  matrimonial home.
• In some provinces, it is required that both
  spouses (the one registered on title AND the
  untitled spouse) sign any document mortgaging the
  home or any document intended to transfer or sell
  the property.
• In other provinces, the interest in the property
  of the non-titled spouse crystallizes only when
  either spouse has commenced an application under
  matrimonial property legislation.
• In those provinces there is no consent required
  during marriage to mortgaging or even sale of the
  home owned by one spouse.
• Restrictions on disposition are intended to
  prevent one spouse from disposing of assets in
  anticipation of a separation.

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Methods of Property Division

• The method of dividing shared assets varies from
  province to province. Some provinces deem all
  property in the asset pool to be 50 owned by
  each spouse. In such instances, the spouses
  trade one property for another to arrive at an
  equal division.
• Other provinces, including Ontario, provide for
  an equalization payment. In that case, each
  spouse completes a financial statement and the
  assets, after being valued, are subject to
  equalization by way of a cash payment to the
  spouse with the lesser net asset amount.
• Legislation in some provinces, including Ontario,
  protects a Canadian-owned business or farm
  property from a forced sale to make an
  equalization payment. Such legislation allows
  equalization payments to be made over a period of
  up to 10 years.

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Key Aspects of Division of Property

• Because legislation varies from province to
  province and is subject to change, a review of
  applicable legislation is essential.
• It is critical that a spouse owning a business
  determine the extent to which an equalization
  payment of property will have an adverse effect
  on an ongoing business. The most effective way
  to limit an equalization payment or transfer of
  property, or to limit the effect of this on a
  business, is to draw up a marriage contract.
• Financial disclosure is mandatory and valuations
  of businesses, pensions, and significant assets
  must be obtained. The value of the assets should
  include, where appropriate, any tax liability if
  the asset must be disposed of to make an
  equalization payment.

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Key Aspects of Division of Property...

• The provincial legislation will determine whether
  property is divided, or whether a money payment
  is made. It is critical that options with
  respect to division be explored.
• The division of property on marital breakdown is
  a complicated and involved process.

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Division of Family Assets

• Family assets, or the value of the assets, are
  subject to division in all jurisdictions.
• Family assets have been defined as property owned
  by one or both spouses and ordinarily used by a
  spouse or a minor child of either spouse for a
  family purpose. Extended in some provinces to
  include
• a share in a corporation which owns property that
  would be a family asset if owned by a spouse
• bank accounts ordinarily used for family
  purposes
• a spouses rights under an annuity, pension plan,
  home ownership plan or retirement savings plan.

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Summary

• The purpose of this was to acquaint you with the
  key areas of Canadian Family Law with the focus
  on its financial aspects.
• In the event of marriage breakdown the laws in
  each province require a division of assets and
  ongoing maintenance for children. While a
  financial planner cannot base a plan on this
  contingency, he or she should be aware of the
  implications of separation and divorce on all
  parties.
• A good financial planner should be able to
  provide advice which would reduce the negative
  effects on all parties concerned.

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Additional Sources of Information

• Guidelines for support