The Strategies: (14) Pay Reasonable Child Support; (15) Minimize Spousal Support

Upon separation the non-custodial spouse will have to pay child support to the spouse who has custody of the children. The amount is calculated according to federal and provincial Child Support Guidelines. Often, the non-custodial spouse may decide, for any number of wrongheaded reasons, not to pay child support unless or until ordered to do so by the court. It is quite common for a number of years to pass between the date of separation, the commencement of litigation and judgment.

If the non-custodial parent has not paid any child support in the interim, or paid an amount below that is mandated by the Guidelines, he or she could be faced with an order to pay substantial arrears in child support. If sufficient cash is not on hand to satisfy that order, assets will have to be sold, with all the problems that that entails.

Putting that issue aside for the moment, a parent who fails to act in the best interests of the children, for example, by refusing to pay child support, runs the risk of incurring the wrath of the court. The conduct of spouses can be factored into a number remedies that the court might order.

Thus, it is to your advantage to get legal advice as to the amount of child support you might be expected to pay and to make that payment immediately upon separation, until the court orders otherwise.

The Strategies: (15) Minimize Spousal Support

The end of a marriage does not necessarily mean that one spouse will have to pay spousal support to the other. However, if a spousal support order is made, the court will take into consideration a number of factors when determining the amount that is to be paid, including the current and future assets and means of each spouse, the claimant’s needs based on lifestyle during the marriage and the other spouse’s ability to pay. Generally speaking, the spouse with the greater means (i.e., income) will have to pay support to the spouse with the greater needs.

One means of minimizing your spousal support obligation is through a separation agreement that provides for either lump sum or periodic support. As stated previously, the courts will uphold a domestic agreement unless there was incomplete financial disclosure, a lack of independent legal advice or undue influence. However, even a carefully constructed agreement will not preclude the court from revisiting the spousal support issue sometime in the future.

Another method of reducing your exposure is to insure that income from an asset that has been capitalized for the purposes of equalization is not included in the spousal support calculation. A good example of such an asset is a pension that has been recently valued and equalized as part of your net family property. The income derived from such a pension should not form part of your income for the purpose of calculating any liability you may have for spousal support.

To minimize spousal support, consideration should also be given to analyzing the claims made by your spouse regarding his or her present and future needs by assessing, among other things, his or her income from all sources, the accustomed standard of living and the impact of payments received through equalization.

For more information on divorce and other family law matters, please visit MyOntarioDivorce.com or BermanBarristers.com.

Sincerely,

Robert Berman B.C.L, LL.B
Founder & Family Law Lawyer

The Strategies: (12) Close All Joint Accounts And Re-designate Beneficiaries; (13) Claim All Contingent Taxes And Costs Of Disposition

Unfortunately your marriage has come to an end and you and your spouse will now travel separate paths. It is important that you sever all of your financial links. All joint accounts, including credit cards and other loan facilities should be closed, and new accounts opened in your name only. Failure to do so will expose you to liability for the full amount of any debt for as long as any joint accounts remain open, regardless of whether the debt was incurred before or after separation or divorce.

It is also important to remove your ex-spouse as a beneficiary of assets such as your Registered Retirement Savings Plans (RRSPs) and life insurance policies. While doing so does not provide you with any monetary benefit, it ensures that your spouse will not receive any benefit from these assets upon your death.

The Strategies: (13) Claim All Contingent Taxes And Costs Of Disposition

If you have been ordered to make an equalization payment and you do not have enough cash on hand to satisfy the judgment, assets will have to be sold to meet the obligation. Assets such as RRSPs and equities will attract income or capital gains taxes upon disposition. The liquidation of other assets, such as the matrimonial home will entail incurring certain costs of disposition.

These amounts, which are contingent until the asset is sold or otherwise disposed of, should be deducted when calculating your net family property. An asset is only worth in real terms what is netted after all such costs are deducted from the proceeds of disposition. Again, professional advice is advisable to ensure that all such costs are accounted for.

For more information on divorce and other family law matters, please visit MyOntarioDivorce.com or BermanBarristers.com.

Sincerely,

Robert Berman B.C.L, LL.B
Founder & Family Law Lawyer

The Strategies: (10) Designate Your Children As Beneficiaries; (11) Maintain Liquidity

Estate planning, including designating your children as the beneficiaries of bank accounts, RRSPs and other investments, can be an effective way to insulate those assets from equalization. Courts have held that property specifically and expressly intended to benefit children should be excluded from a spouse’s net family property.

It is important that whatever estate planning is undertaken be done with due consideration given to the potential effects of the end of a marriage. That is, an estate plan could be open to scrutiny in the event that matrimonial litigation is commenced. As stated, the creation of a trust or a gift of property, if made after marital difficulties arose or close to the date of separation, could be viewed by a court as an intentional depletion of assets aimed at frustrating the other spouse’s claim to equalization. In such circumstances, the details of an estate plan or trust or gift could be ordered to be produced to allow the court to determine if such an allegation has any merit.

The Strategies: (11) Maintain Liquidity

This strategy is important when it becomes clear that the marriage has failed and that the wealthier spouse will have to make some form of equalization payment. The Act does not entitle a spouse to an interest in or a right to a division of any specific asset of the other spouse. That is, a payment of money will be ordered by the court. Having sufficient liquid assets on hand will avoid the necessity of selling property to satisfy the equalization payment. A forced sale is not the best way to maximize the value of any given asset.

For more information on divorce and other family law matters, please visit MyOntarioDivorce.com or BermanBarristers.com.

Sincerely,

Robert Berman B.C.L, LL.B
Founder & Family Law Lawyer

The Strategies: (8) Avoid Ownership And Joint Accounts; (9) Place Property In Trust

The law in Ontario presumes that property held by spouses jointly, including bank accounts, is to be shared equally, regardless of the source of the property.

So, for example, if a spouse who receives a gift of money during the course of the marriage deposits it into a joint bank account, he or she will only be entitled to exclude one-half of the account for his or her net family property unless the presumption can be rebutted by evidence of a mutual and contrary intention. This is so, even if the jointly held property can be traced back to the otherwise excludable property.

The Strategies: (9) Place Property In Trust

Property that is placed in trust for the benefit of your children or other loved ones does not form part of a spouse’s net family property. In a properly constituted trust, the person who provides property to the trust, the settlor, no longer has control over that property. A settlor is a person who settles property on express trust for the benefit of beneficiaries, meaning that the purpose for the trust is very well defined and specific. In some legal systems, a settlor is also referred to as a trustor, or occasionally, a grantor or donor. The trustee is the person who controls the trust property.

However, if the settlor retains or exercises control over the trust or the property itself, the court could disregard the trust and include the value of the property in the settlor’s net family property calculations. Furthermore, trusts created by one spouse after the marriage begins to experience difficulties or just prior to separation could be viewed as an intentional depletion of assets. In such cases, the value of the property could also be clawed back into the settlor’s net family property.

In addition to domestic trusts, consideration should be given to non-resident trusts, also known as offshore trusts. While the federal government has eroded the tax benefits of offshore trusts in recent years, they can afford assets a greater degree of protection from creditors than can domestic trusts, depending on the country in which the trust is resident. However, these are complex vehicles requiring competent professional advice with respect to both the laws of Canada and the offshore jurisdiction.

For more information on divorce and other family law matters, please visit MyOntarioDivorce.com or BermanBarristers.com.

Sincerely,

Robert Berman B.C.L, LL.B
Founder & Family Law Lawyer

The Strategies: (6) Maximize The Exclusion For Gifts And Inheritance; (7)) Ensure Trace-ability Of Gifts And Inheritances

The Act sets out certain categories of property, the value of which are not included in a spouse’s net family property. Specifically, gifts, inheritances, damages for personal injury and proceeds of life insurance policies received by a spouse during the course of the marriage are excluded from his or her net family property.

Importantly, the income derived from gifts and inheritances can also be excluded providing that the donor or the deceased has expressly stated that the income is to be excluded from the recipient’s net family property. Most substantial gifts and almost all inheritances are received from family members. They should be made aware that if they want you to enjoy the full benefit of the gift or inheritance, provision should be made in writing that any income derived from a gift or inheritance is to remain separate and not from part of your net family property. Failure to do so will mean that the income will not be excluded.

Gifts of property to your children or other loved ones can be an effective means of reducing your net family property. This is a sensible option particularly if you intend to make your children the beneficiaries of your estate in any event. Gifts can be made outright or through transactions such as the estate freeze. Tax and accounting advice is recommended before any decision about the structure of an intended gift is made.

*Beware: There is a potential catch to using gifts to reduce your net family property. If a court were to find that gifts were made to intentionally deplete your net family property, the value could be clawed back and become subject to equalization. Again, timing is everything.

The Strategies: (7) Ensure Trace-ability Of Gifts And Inheritances

The Act also excludes from net family property the value of property into which gifts, inheritances, damages for personal injury and proceeds of life insurance policies received during the marriage can be traced. However, these exclusions can be lost in a number of ways. As such, you will not be able to claim an exclusion if a gift or inheritance was used to purchase the matrimonial home or converted to that use. An exclusion may also be lost if the value of it cannot be accurately followed into property into which it is invested. The trail of investment must therefore be adequately documented in order to preserve the exclusion.

In addition, an exclusion could be lost completely if the property is used for communal family purposes. Case law exists to the effect that where a gift or other potentially excludable property has been invested in property for the common purpose of the family, such as a family car, the value of the gift cannot be excluded.

For more information on divorce and other family law matters, please visit MyOntarioDivorce.com or BermanBarristers.com.

Sincerely,

Robert Berman B.C.L, LL.B
Founder & Family Law Lawyer

The Strategies: (4) Increase The Equity In Your Property Prior To Marriage, Leverage Your Property Prior To Marriage, And Increase Debt During Marriage; (5) Sell Your Existing Matrimonial Home

The Act specifically allows spouses to deduct from their net family property the value of property, other than the matrimonial home, that a spouse owns on the date of marriage after deducting any debts or liabilities existing on the date of marriage. The greater the equity you have in any given asset, the greater will be the deduction you can make at the end of the day.

The converse is true at the end of the marriage. Leveraging your assets during the course of the marriage will reduce their net value at the date of separation and, consequently, the value of your net family property. Increasing your debt over the course of the marriage will have a similar effect.

Either way, this means that your net family property will be reduced and that means you will have less to equalize when you separate. The smaller the cheque you have to write, the better. Who knows? Maybe your net family property will be low enough for you to be the recipient of the cheque. Would that not be nice?

But timing is everything. A court can essentially ignore a transaction that has the effect of reducing the value of a property if it is shown that the transaction was carried out to intentionally deplete the assets available for equalization.

The Strategies: (5) Sell Your Existing Matrimonial Home

As noted, the Act does not allow a deduction for the matrimonial home, which is given a distinct and special status under the Act. However, in order for a property to qualify as a matrimonial home, it must be ordinarily occupied as a family residence at the time of separation. If it is not, then it is not a matrimonial home. Thus, the value of a property brought into the marriage by one spouse is deductible if it is sold prior to separation, even if it was occupied as the family home. Furthermore, the deduction can be made even if the proceeds of sale are used to purchase another residence that is the matrimonial home at the time of separation. It is the value of the matrimonial home occupied as such at the time of separation that is not deductible.

For more information on divorce and other family law matters, please visit MyOntarioDivorce.com or BermanBarristers.com.

Sincerely,

Robert Berman B.C.L, LL.B
Founder & Family Law Lawyer

The Strategies: (3) Get It In Writing

Even if there is no immediate intention to get married, you should seriously consider entering a cohabitation agreement spelling out your respective rights and obligations in relation to property that is brought into or acquired during the period of cohabitation. A simple rule of thumb no matter where you are in the relationship is to conduct yourself as if you and your spouse are separate as to property. That is, whatever you acquired before or acquire during the period of cohabitation should be maintained in your name alone to the greatest extent possible, and your intention to exclude such property from your net family property, in the event you marry, should be expressed in the agreement.

Domestic contracts are equally useful for those who intend to get married or are already married. Like cohabitation agreements, marriage contracts, which include prenuptial agreements, can set out the spouses’ respective rights and obligations regarding the ownership and division of property, child and spousal support and other matters in the event that the marriage fails. They are an effective means of protecting assets from being subject to property disputes at the end of a marriage.

Care must be taken when entering such an agreement to ensure that it will be enforceable. Each spouse to the other must disclose all relevant financial matters. In addition, each spouse must have independent legal advice as to the advisability of entering into any proposed agreement. Finally, there must be no coercion or undue influence exerted by one spouse over the other.

Undue influence is defined as a judicially created defence to transactions such as executing a will to leave assets in a particular way, making a direct gift while alive, or signing a contract, that have been imposed upon weak and vulnerable persons that allows the transactions to be set aside. Virtually any act of persuasion that overcomes the free will and judgment of another, including exhortations, importunings, insinuations, flattery, trickery, and deception, may amount to undue influence. Undue influence differs from duress, which consists of the intentional use of force, or threat of force, to coerce another into a grossly unfair transaction. Blackmail, Extortion, bad faith threats of criminal prosecution, and oppressive Abuse of Process are classic examples of duress.

Four elements must be shown to establish undue influence. First, it must be demonstrated that the victim was susceptible to overreaching. Such conditions as mental, psychological, or physical disability or dependency may be used to show susceptibility. Second, there must be an opportunity for exercising undue influence. Typically, this opportunity arises through a confidential relationship. Courts have found opportunity for undue influence in confidential relationships between Husband and Wife, fiancé and fiancée, Parent and Child, trustee and beneficiary, administrator and legatee, Guardian and Ward, attorney and client, doctor and patient, and pastor and parishioner, just to name a few. Third, there must be evidence that the defendant was inclined to exercise undue influence over the victim. Defendants who aggressively initiate a transaction, insulate a relationship from outside supervision, or discourage a weaker party from seeking independent advice may be attempting to exercise undue influence. Fourth, the record must reveal an unnatural or suspicious transaction. Courts are wary, for example, of testators who make abrupt changes in their last will and testament after being diagnosed with a terminal illness or being declared incompetent, especially if the changes are made at the behest of a beneficiary who stands to benefit from the new or revised testamentary disposition.

Nevertheless, courts will examine the facts closely before finding that a transaction has been tainted by undue influence. Mere suspicion, surmise, or conjecture of overreaching is insufficient. The law permits loved ones and confidants to advise and comfort those in need of their support without fear of litigation. Courts are also aware that the doctrine of undue influence can be used as a sword by the vindictive and avaricious that seek to invalidate a perfectly legal transaction for personal gain. When undue influence is found to have altered a transaction, however, courts will make every effort to return the parties to the same position they would have occupied had the overreaching not occurred.

*Beware: The courts can set aside a domestic contract on any of these grounds. And the fact that the other spouse has received independent legal advice is no guarantee that a domestic contract will be upheld if the conduct of the more economically powerful spouse leading up to the signing of the agreement is sufficiently lacking in good faith as to warrant the intervention of the court.

For more information on divorce and other family law matters, please visit MyOntarioDivorce.com or BermanBarristers.com.

Sincerely,

Robert Berman B.C.L, LL.B
Founder & Family Law Lawyer

The Strategies: (2) Know What You Own

Given that it is the value of the spouses’ net family properties that is equalized, it is vitally important to draw up a detailed inventory of all forms of property in your portfolio, as well as your debts and liabilities, and to ascribe a value to each as of the date of marriage. Any court ordered equalization of marital property would be based on a Financial Statement form filed with the court setting out all of the assets and liabilities of each spouse at the date of marriage and at separation. Claims regarding the value of particular properties, or allowable deductions and exclusions, will have to be substantiated with documentary evidence. Cataloguing your assets and liabilities at the time of marriage will help establish those claims with evidence that might otherwise be lost with the passage of time.

Financial Statements play a crucial role in the division of matrimonial property. The services of highly skilled financial professionals with a firm understanding of the law of family property are indispensable. In certain cases, particularly where the value of a significant asset is in dispute, the evidence of an expert valuator will also be required. Retaining respected professionals has to be a priority if one’s views regarding the value of assets are to have any chance of prevailing in what can often become a war of expert opinions.

For more information on divorce and other family law matters, please visit MyOntarioDivorce.com or BermanBarristers.com.

Sincerely,

Robert Berman B.C.L, LL.B
Founder & Family Law Lawyer

The Strategies: (1) Do Not Get Married

Unlike matrimonial property, the assets owned by common law spouses remain separate and apart, and are not subject to equalization. Thus, the equalization of family property regime under Ontario legislation can be avoided if you and your mate choose to live as common-law spouses.

Beware, however, that the assets of one common-law spouse are not necessarily immune to claims made by the other. A common-law spouse may be able to establish a trust interest in property owned by his or her partner. Such a trust might be found to exist on a constructive basis if the non-owning common-­law spouse can establish that he or she contributed, financially or otherwise, to the other’s property in a manner that would make it unjust for the owning spouse to retain the benefit of the other’s contribution.

While the courts prefer to order a payment of money to remedy such an unjust enrichment, whether it is based on contributions made to particular property or to the “family enterprise” in general, property can be impressed with a constructive trust if, in the court’s view, an award of money is insufficient. So, if you want to keep your property, including your business, free from any claims by your spouse, do not accept money or work from your spouse without a loan agreement or proper recompense for services rendered.

Also beware that an express or resulting trust interest in favour of a non-­owning common law spouse might be found to have been created where there is an express intention, or evidence of a common intention, that the non-owning or non-titled spouse is to have a beneficial interest in the property legally held by the other. So, be very careful what you say and do. If you want your property and business to remain exclusively yours, do not say or do anything that could be construed as an intention to give your spouse an interest in your property or business.

*Note: An important distinction must be drawn between the equalization of matrimonial property and trust interests. The latter is an ownership claim that can be advanced by anyone against the property of another. The former is a right available only to married spouses entitling the non-owning spouse to be paid a portion of the value of the property despite the fact that the entitled spouse is a non-owner. It should be noted that the constructive, resulting and express trusts are not confined to common law relationships.

Thus, the courts in cases where the Act itself does not provide an adequate remedy for property issues between married spouses might be taken full advantage of by your spouse. Either way, unless you employ one or more of the strategies outlined in this Report, you are at risk. If you are married, just because you are the sole shareholder of your business does not mean that you will not have to pay your spouse a portion of its value when you separate or divorce. Even if you are not married, your spouse may try to claim an ownership interest when you separate, especially if he or she worked in the business. In short, be very careful what you wish for.

For more information on divorce and other family law matters, please visit MyOntarioDivorce.com or BermanBarristers.com.

Sincerely,

Robert Berman B.C.L, LL.B
Founder & Family Law Lawyer

How To Protect What Is Rightfully Yours: Fifteen (15) Killer Divorce Strategies – Total Wealth Protection And The Law

Robert Berman here. Thirty years as a Trial Divorce Lawyer and successful business owner has taught me more than a few tricks of the trade. I know how difficult it is to build a profitable business and how easy it can be for “meat grinding” Divorce Court Judges to demolish them by transferring half of their value to an undeserving ex-spouse. I hope to get you thinking about keeping your business out of Divorce Court when you begin to contemplate starting a life with your loved one or are faced with the unfortunate burden of breaking that bond. But at least it does not really need to be a burden.

These articles briefly set out some of the top wealth protection strategies that can be employed to protect the money and assets you have earned from a former spouse determined to exploit the “family” property laws of Ontario. You will no doubt be shocked to learn just what these laws consider to be “family” property subject to sharing upon divorce or separation. Unless you strongly consider the strategies outlined in these articles, be ready to pull out your cheque book and forfeit half the value of everything you own, including the business you built with your own blood, sweat and tears. The Canadian Revenue Agency may well become a regular pigment on your back, and to add salt to the wound, your ex-spouse could remain the major beneficiary of the growth of your business. So learn how to keep what is rightfully yours.

The Ontario Family Law Act (the “Act”) sets out specific and sometimes complicated rules regarding the treatment of marital property. Essentially, the Act requires married spouses to share equally in any increase or decrease in the value of their property over the course of the marriage. Property is defined in the Act very broadly and encompasses “any interest, present or future, vested or contingent, in real or personal property”. Anything that can be considered property will be considered property for the purposes of the Act.

The process requires each spouse to determine the net value of all of the property he or she owns at the end of the marriage and to subtract from that amount the net value of the property owned as of the date of marriage, taking into account certain exclusions permitted by the Act. The value arrived at is referred to in the legislation as a spouse’s net family property. The spouse with the lesser net family property is entitled to receive, typically by way of cash payment, one-half the difference between the two net family properties. That is, the net family properties are equalized.

Having said that, a spouse can minimize the amount of any equalization payment he or she might be required to make through careful structuring of his or her portfolio in a manner that takes full advantage of the deductions and exclusions allowed by the legislation. Being proactive about protecting your wealth is essential. Waiting until you and your spouse have agreed to separate or divorce before starting to implement wealth preservation strategies is not an option.

As a prudent businessperson, you must plan to minimize taxes. Like all other entrepreneurs, your goal is to minimize expenses and maximize profit. Yet, when beginning or ending a relationship, business people seldom plan to protect their assets from the consequences of marriage or separation. Please read these articles and implement the strategies that follow to apply the planning you do to grow and protect your business.

For more information on divorce and other family law matters, please visit MyOntarioDivorce.com or BermanBarristers.com.

Sincerely,

Robert Berman B.C.L, LL.B
Founder & Family Law Lawyer