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The new Family Law Act – Division of Assets and Debt

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She got the goldmine,
I got the shaft.
They split it right down the middle,
And then they give her the better half.
-Jerry Reed
Family Property and Family Debt:
A New Approach
5 Major Changes to the Law
#1 – COMMON LAW COUPLES
ARE INCLUDED IN THE NEW
LEGISLATION
• Whether or not a couple has “cohabited in a
marriage-like relationship for at least two years” is
a threshold issue
• 2 year limitation period to make a claim
#2 –CERTAIN PROPERTY IS
EXCLUDED FROM DIVISION
• The Family Law Act defines two critical classes of
property, “family property” and “excluded property”
• The FLA eliminates the all or nothing approach of
the current legislation, whereby any asset
ordinarily used for a family purpose is
presumptively divided 50/50.
Excluded property under s. 85
• Property acquired before the
relationship began
• Gifts or inheritances
• Settlement or an award of damages as
compensation for injury or loss, with
exceptions
• Money paid or payable under an
insurance policy, with exceptions
Excluded property under s. 85
• Property referred to in any of the
above that is held in trust for the
benefit of a spouse
• Property held in a discretionary trust,
with stipulations
• Property derived from property or the
disposition of property referred to in
any of the above
The Increase in Value of Excluded
Property is Not Excluded
Family Property includes…The amount by
which the value of excluded property has
increased since the later of the date:
– the relationship between the spouses began,
or
– the excluded property was acquired
#3 – A SPOUSE WANTING MORE
THAN 50% OF “FAMILY
PROPERTY”, WHICH IS NOT
EXCLUDED, WILL HAVE A
HEAVIER BURDEN OF PROOF
• In the past, an equal division must be “unfair” to
one spouse
• The new standard is “significantly unfair”
BUT…
• He or she can be more creative.
• The current law limits the reasons to
award one spouse more than 50% of an
asset
• The Family Law Act leaves the door open
and provides a long list of examples.
Section 95, factors that
may be considered:
• The duration of the relationship
• The terms of any agreement between the
spouses, with exceptions
• A spouse’s contribution to the career or
career potential of the other spouse
Section 95, factors that
may be considered:
• Whether a family debt incurred in the normal
course of the relationship
• If the amount of the family debt exceeds the
value of family property, the ability of each
spouse to pay a share of the family debt
• Whether a spouse, after the date of separation,
caused a significant decrease or increase in the
value of family property or family debt beyond
market trends
Section 95, factors that
may be considered:
• The fact that a spouse other than a spouse acting in
good faith
– substantially reduced the value of family property, or
– disposed of, transferred or converted property that is or would
have been family property, or exchanged property that is or
would have been family property into another form, causing the
other spouse’s interest in the property or family property to be
defeated or adversely affected
• A tax liability that may be incurred as a result of a
transfer or sale of property or as a result of an order
• Any other factor, other than the consideration referred to
in subsection (3) that may lead to significant unfairness
#4 – FAMILY DEBT IS DIVISIBLE
The “old” Family Relations Act
• The term “family debt” is not
defined nor is there any
provision for the division of
debt
• The liabilities of one or both
spouses are a factor under s.
65(1) to be considered by the
court in its determination of
whether an equal division of
assets is unfair
The “new” Family Law Act
• Section 86 broadly defines
family debt
• There is no requirement for a
nexus between a debt and a
family purpose or benefit.
• Debts of a spouse that are
strictly personal in nature may
be the subject of a
reapportionment claim
#5 – MORE DEFERENCE TO
PROPERLY NEGOTIATED
PRENUPTIAL AND
COHABITATION AGREEMENTS
• Under the current law, marriage agreement can be varied
on the basis of unfairness (section 65)
• Under the FLA, the test to vary an agreement is more
rigorous than mere unfairness
• The FLA sets out a two-part test for considering whether
agreement should be upheld: (1) Procedural Fairness at
the time the Agreement was made and (2) Circumstances
at the time the Agreement is challenged –reliance and
expectations.
Section 93(3) of the FLA
The Supreme Court may set aside or replace with
an order made under this Part all or part of an
agreement described in subsection (1) only if
satisfied that one or more of the following
circumstances existed when the parties entered
into the agreement:
• A spouse failed to disclose significant
property or debts, or other information
relevant to the negotiation of the agreement
Section 93(3) of the FLA
• A spouse took improper advantage of the
other spouse’s vulnerability, including the
other spouse’s ignorance, need or distress
• A spouse did not understand the nature or
consequences of the agreement
• Other circumstances that would, under the
common law, cause all or part of a
contract to be voidable
Section 93(5) of the FLA
Despite subsection (3), the Supreme Court may
set aside or replace with an order made under
this Part all or part of an agreement if satisfied
that none of the circumstances described in that
subsection existed when the parties entered into
the agreement but that the agreement is
significantly unfair on consideration of the
following:
• The length of time that has passed since the
agreement was made
Section 93(5) of the FLA
• The intention of the spouses, in making
the agreement, to achieve certainty
• The degree to which the spouses relied on
the terms of the agreement
Section 93(4) of the FLA
The Supreme Court may decline to act
under subsection (3) if, on consideration of
all of the evidence, the Supreme Court
would not replace the agreement with an
order that is substantially different from the
terms set out in the agreement.
In drafting agreements, the Family
Law Act implies that counsel must:
• Insist upon generous disclosure, and
make a record of the documents and
information disclosed
• Require the other party to obtain
independent legal advice
• Obtain medical certificates of competence
when there are any doubts about a party’s
fitness or mental state
Questions?
Thank You,
Megan J. McWhirter
Associate, Watson Goepel LLP
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