Tag: matrimonial home

19 Dec

When does a Beneficiary have a Specific Interest in Trust Assets?

Rebecca Rauws Estate & Trust Tags: , , , , , , , , , 0 Comments

A beneficiary of a trust can have either a vested or a contingent interest in the trust’s assets. For example, if a trustee holds an asset in trust for another person, with no further conditions attached, the beneficiary’s interest in that asset will be vested. However, if the trustee holds the same asset in trust for a beneficiary, subject to the condition that the beneficiary attain the age of 30, that beneficiary’s interest depends on them reaching the age of 30, and is therefore contingent. Whether a beneficiary’s interest is vested or contingent can have different consequences depending on the particular circumstances.

In Spencer v Riesberry, 2011 ONSC 3222 (affirmed in Spencer v Riesberry, 2012 ONCA 418), the Ontario Superior Court of Justice considered the nature of a beneficiary’s interest in a trust. Specifically, in the context of matrimonial litigation, the court considered whether a spouse’s beneficial interest in real property held by a trust could be considered as “property in which a person has an interest” for the purpose of s. 18(1) of the Family Law Act, R.S.O. 1990, c. F.3, such that the property in question could be considered the matrimonial home. If a property is considered to be a matrimonial home, pursuant to s. 4 of the Family Law Act, it cannot be deducted or excluded from the calculation of net family property and can contribute to increasing the owner spouse’s net family property.

In this case, a married couple, Sandra and Derek, had been residing, with their children, in their family home on Riverside Drive. In 1993, Sandra’s mother, Linda, had purchased the Riverside Drive property and settled it in a trust (the “Trust”). Sandra and Derek resided in the residence prior to their marriage in 1994, as well as during the marriage. The couple separated in 2010.

The beneficiaries of the Trust were Sandra, Linda, and Linda’s three other children. Three other properties were added, by gift, to the Trust over subsequent years, and each of these other properties were occupied by one of the other three children and their families.

The terms of the Trust provided that the trustee was to hold the trust property, subject to a life interest in favour of Linda. Upon Linda’s death, the trustee was to divide the trust property into equal parts so that there is one part for each beneficiary living at the date of Linda’s death.

The court considered the nature of Sandra’s interest in the Riverside Drive property in the context of her net family property and whether it could be characterized as a matrimonial home. Due to the terms of the Trust, the court held that Sandra did not have a specific interest in the Riverside Drive property. Although she was a beneficiary of the Trust, which owned the Riverside Drive property, it does not follow that Sandra was specifically entitled to that property in particular. Sandra’s interest in the Trust was characterized as a contingent beneficial interest, as her ultimate entitlement under the Trust depended on various factors. For instance, as the division of Trust property amongst beneficiaries would happen only upon Linda’s death, the assets to be distributed would consist of whatever is held by the Trust at that time. Additionally, the beneficiaries must be alive at the time of Linda’s death in order to receive their share.

On this basis, the Court concluded that Sandra did not have a specific interest in the Riverside Drive property such that it could be considered a matrimonial home. As Sandra was a contingent beneficiary of the Trust, the Court did find that she held an interest in the Trust’s assets generally, which was required to be valued and included as part of the equalization calculations. However, as the interest is not subject to the special treatment given to the matrimonial home, it can be deducted or excluded from net family property, as applicable. Overall, as Sandra’s interest in the Trust’s assets was contingent and not vested, it had a significant effect on the matrimonial proceedings with her spouse.

 

Thanks for reading and happy holidays!

Rebecca Rauws

 

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11 Jul

Real Estate and the Matrimonial Home

Ian Hull In the News Tags: , , , 0 Comments

Last week, the Toronto Real Estate Board (“TREB”) released a report that Toronto home prices in the month of June jumped nearly 17% compared with the same month last year. Toronto and Vancouver real estate prices are frequently a news topic, but regardless of where you live, the home often represents the largest and most important asset of a person’s estate.

We have previously written on the rights of common law spouses under the Succession Law Reform Act. However, surviving married spouses have those rights and more. Surviving married spouses also have recourse to the Family Law Act (“FLA”). Under section 6(1) of the FLA, a surviving married spouse can file an election for equalization of net family property. In essence, a surviving married spouse is entitled to half of all the property of the marriage – regardless of who held legal title and regardless of the terms of the deceased spouse’s will.

Ontario has implemented a pecuniary (or payment) regime rather than a proprietary regime. This means that an election in Ontario does not give a married spouse a right to a particular piece of property; instead it gives the surviving spouse a right to receive (or make) a payment. One implication of this is highlighted below, but for now, it should be noted that the law affords special protection to a surviving married spouse’s interest in the matrimonial home. Section 18(1) of the FLA defines the matrimonial home as the property “ordinarily occupied by the person and his or her spouse as their family residence.”

02FAEBOQ2GThe special protections given to the matrimonial home are numerous. For example, under section 19 of the FLA, a spouse is entitled not only to a payment but to possession of that property.Under section 26 of the FLA, if a deceased spouse owns the matrimonial home as a joint tenant with someone other than the married spouse, the joint tenancy is immediately severed and the surviving spouse is allowed to retain possession of the home, rent free, for sixty days after the other spouse’s death. In addition, even though Ontario has adopted a payment regime, a surviving spouse’s entitlement to ½ of the net value of the matrimonial home is afforded special protection, particularly against creditors.

Thibodeau v Thibodeau, 2011 ONCA 110, is a family law case involving two living spouses, but it is instructive with regard to the rights of a surviving spouse and their interest in the matrimonial home. In this case, an ex-wife obtained a court order for an equalization payment from her ex-husband. The ex-husband then declared bankruptcy. The ex-wife sought an order granting her equalization payment priority over her ex-husband’s unsecured creditors. The Court refused to grant the payee-wife priority over other unsecured creditors of the payor-husband. However, the ex-wife had already received her share of the proceeds from the sale of the matrimonial home. While the Court order did not mean that the ex-wife would not later recover the rest of the payment owed to her – as she had other avenues by which to secure her payment – the case is significant because the ex-wife’s ½ interest in the matrimonial home and rights therein were not prejudiced by her ex-husband’s bankruptcy.

While there is some uncertainty with regard to the prioritization of claims in an insolvent or bankrupt estate, it is likely that a surviving married spouse’s interest in a matrimonial home would gain similar protections in an estate’s context – which, according to the TREB, is good news for married couples who own a home in Toronto.

Thank you for reading.

Ian M. Hull

04 May

Inheritance and the Matrimonial Home

Hull & Hull LLP Estate & Trust, In the News Tags: , , 0 Comments

Ontario`s Family Law Act has a profound impact on a couple`s financial situation on dissolution of a marriage. For instance, under Part I of the Act, “Property, other than a matrimonial home, that was acquired by gift or inheritance from a third person after the date of marriage” is excluded from an individual’s net family property (“NFP”). However, if the inheritance is invested into the matrimonial home, it ceases to be excluded from NFP.

With rising house prices in cities across the country, a large part of a young couple`s income tends to go into down payments, mortgage payments and improving the residence. It can take years for couples making modest incomes, many with some student or consumer debt, to save enough for a down payment on a starter home in a sought-after neighbourhood. When inheritance comes into the picture, the task becomes much less onerous.

With a fear of losing the sole right to one`s inheritance, however, young couples may think twice before investing the money in their family home.

The story of a couple encountering this scenario was recently illustrated in a MoneySense article here. It also outlines the possible options for the money in this type of situation.

One option is to keep the inheritance separate from a matrimonial home and invest the money for future use. This can be a good option if you are financially savvy and/or hire professionals to assist with management of portfolios. However, real estate is generally a solid way to invest, and means a couple can stop paying rent and start putting money into their future.

Another, more balanced, option would involve putting a portion of the money into the family home, while keeping the rest in other, individually-owned, investments. Although putting some money into the family home is a risk if divorce takes hold down the road, it is also a smart investment for the family’s future and for diversification of assets. One comfort in the compromise is that the young couples may eventually have children, thereby causing the couple to remain in each other`s lives, regardless of separation or divorce.

Thank you for reading.

Ian Hull

17 Oct

Hull on Estates #352 – The Family Law Act and Matrimonial Homes

Hull & Hull LLP Hull on Estates, Podcasts, Show Notes, Show Notes Tags: , , , , , , , 0 Comments

Listen to: Hull on Estates #352 — The Family Law Act and Matrimonial Homes

Today on Hull on Estates, David Smith and Holly LeValliant discuss a recent case Brash v. Zyma, 2013 ONSC 2800, where the Applicant developed Parkinson’s Disease, which made it impossible for her to live in the matrimonial home. Accordingly, the Estate argued that at the valuation date (the date of death of the deceased), the property was not ordinarily occupied by the Applicant and therefore was not a matrimonial home pursuant to the Family Law Act. David and Holly discuss the broader implications of the issue in the Estates and Guardianship contexts.

If you have any questions, please email us at hull.lawyers@gmail.com or leave a comment on our blog page.

Click here for more information on David Smith.

Click here for more information on Holly LeValliant.

 

12 Sep

The All-Powerful Constructive Trust

Hull & Hull LLP Estate & Trust Tags: , , , , , , 0 Comments

In Langston v. Landen, a recent decision of the Ontario Court of Appeal, one of three co-executors of an estate having a value of some $24 million (in the words of the Court) "managed to shunt the other two executors to the sidelines.  He started to loot the estate."  Among Landen’s transgressions was his use of estate assets to purchase a home in Forest Hill which he had put in his wife’s name.  On a motion for summary judgment, Justice Greer had imposed a constructive trust on the house for the benefit of the estate.

Landen’s wife appealed.  However, the Court easily concluded that the fact that legal title was in her name was irrelevant in circumstances in which the entire purchase proceeds came from the estate.  Adopting a quote from the Reasons for Decision of Justice Greer, the Court stated: "Since the money came from Landen in his capacity as a fiduciary, the constructive trust or express trust flows from him and the money can be traced from him to the house purchase and renovation." 

So too, for the same reasons, the wife’s entitlement to any share of the property as the "matrimonial home" was negated.  Of passing interest to the profession was the Court’s additional conclusion that Justice Greer was well within her jurisdiction by imposing a vesting order on the house for the benefit of the estate in the absence of a motion seeking such relief. 

David M. Smith

 

 

01 Jul

Dependant Relief and the Succession Law Reform Act – Hull on Estates #117

Hull & Hull LLP Hull on Estates, Podcasts, Wills Tags: , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , 0 Comments

Listen to Dependant Relief.

This week on Hull on Estates, Natalia Angelini and Craig Vander Zee discuss dependant relief and reference a variety of cases that utilized the Succession Law Reform Act.

Comments? Send us an email at hull.lawyers@gmail.com, call us on the comment line at 206-350-6636, or leave us a comment on the Hull on Estates blog.

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