This BC Family Law property division paper supplements a BC Family Law paper entitled ‘Valuation of Contingent and Discretionary Trusts’ prepared by Lorne N. MacLean for Continuing Legal Education  in November 2004.

One of the problems with dividing a trust, is that the trust represents a complex package of rights, powers and interests which are not necessarily fixed at any point in time.  While assets acquired during the marriage as a shared enterprise often represent little cause for emotion and bitterness, dividing a trust set up by a third party will likely cause that third party to believe the court is making an unjustified division of wealth completely unconnected to the marriage.

Valuation issues with respect to trusts can include the following:

Family trusts are common estate and tax planning devices. There is often the mistaken assumption that a spouse’s interest in the capital from a trust set up by his or her parents or family member is not a family asset that will be shared with the other spouse although the income from that trust can be considered in determining spousal and child support. This is false. A spouse’s interest in a trust may in fact be a family asset providing it can be established that there is a common intention between both parties that the trust would provide for the family’s future financial security.

One of the most contentious issues in divorce proceedings is the division of business assets. The first question is whether the business interest is a family asset. The second is, if it is a family asset, how it should be valued for the division of assets. The spouse seeking to keep the business in his or her allocation of assets wants the value to be low and the spouse not wishing to retain the business wants its value to be high so as to entitle him or her to a larger share of the other family assets. So the question is - how do the courts assign a value to a business? This can be especially difficult if it is a small, closely held business where the shares can not be freely transferred.

Lorne N. MacLean, a B.C. Family Law lawyer, warns persons going through divorce to address the following three issues relationg to pensions and life insurance:

1) If your spouse has a pension, an RRSP, life insurance policies, or RRIF’s, it is critical that you ensure that your lawyer obtains an interim injunction restraining your spouse from changing the beneficiary designation under any of these items. You want to ensure you continue to be the sole beneficiary under these assets or policies and if you are not, you should seek an immediate order compelling your spouse to name you as sole beneficiary under these assets or policies.

In the recent court case of Hartshorne v. Hartshorne the Supreme Court of Canada has stated that when parties enter into a prenuptial agreement the terms of that agreement will be upheld in all but the most unusual of cases. This decision has essentially rendered the Family Relations Act section 65 provision that allows separation or marriage agreements to be set aside on grounds of “unfairness” effete.

The decision of the majority also held that a business asset should be excluded from division of assets if that asset is used to pay support.