Property rights with marriage breakdown and death

Margaret O’Sullivan from O'Sullivan Estate Lawyers Professional Corporation explains the issues of cross-border, multi-jurisdictional, domestic trust and real estate

Canadians are increasingly mobile within Canada. Employees are transferred and move with their families to another province, couples decide to retire in a province with a more moderate climate, or seniors decide to move to be closer to their children and grandchildren. But in changing jobs, lifestyle and family connections, our legal "lives" are also changed. It is surprising how significantly the basic laws that govern property rights on marriage breakdown and death differ if we survey each province's and territory's regime. This fact is not well-known among most Canadians, and can lead to unexpected results.

In a recent presentation I made at the Annual International Estate Planning Institute in March in New York City, I had the opportunity to speak on this topic, and surveyed each Canadian jurisdiction (see my presentation and the full survey). Here are a few highlights:

-To divide family property, most Canadian jurisdictions use a "proprietary" model - which focuses on the division of specific assets (B.C., Alberta, Saskatchewan, New Brunswick, Nova Scotia, Newfoundland, and Yukon). Generally, this model is considered more flexible, provides less certain outcomes, and is more narrow in scope in the type of assets divided.
-The other model used is the "compensation" model which divides the value of property built up during the relationship, not the property itself, with certain types of property excluded, such as gifts and inheritances (Manitoba, Ontario, Quebec, P.E.I., Northwest Territories and Nunavut). Generally, this model is considered less flexible, produces more certain outcomes since a formula is used, and is broader in scope, since it typically also includes business assets, leading to a greater equalization of property.
-Some provinces have extended a claim for division of property on breakdown of a relationship to certain cohabiting spouses, not just married ones, (including B.C., Saskatchewan, Manitoba, Quebec, Nova Scotia, Northwest Territories and Nunavut) based on specific conditions being met, including length of the cohabitation. The rights of common law spouses can change dramatically if a couple moves to another province or territory.
-A dramatic difference is that death is not a triggering event for a property claim in all Canadian jurisdictions: claims on death are not available in B.C., Alberta, P.E.I., Yukon (under pending Alberta legislation, death will be a triggering event for married spouses). Where a claim can be made, some limit it to married spouses only (Ontario, New Brunswick, Newfoundland, and Quebec (unless the couple have entered into a "civil union")). Saskatchewan, Manitoba, Northwest Territories, Nova Scotia, and Nunavut allow claims on death for certain cohabiting spouses.

Consider the result if a couple moves from Ontario to P.E.I. to retire, and one of them changes their will to exclude the other. While resident in Ontario, the surviving spouse would have had a claim to equalization of their family property, which is not available in P.E.I. leaving the spouse in a far different situation than they may have expected. Or if a business owner moves from Ontario with her common law spouse to Manitoba, and the relationship breaks down. Had the breakdown occurred in Ontario, there would be no statutory claim for property division, and in Manitoba there is.

The overarching question is why is there not more harmonization and uniformity in Canada on certain fundamental issues relating to property division? Recent provincial updates of their legislation seem to reflect each province or territory still "doing its own thing", which leads to disharmony, as well as unpredicted and unexpected results for the average person. And it also leads to the critical need before making that move to also understand the legal implications, and plan accordingly.

 

The comments offered in this article are meant to be general in nature, are limited to the law of Ontario, Canada, and are not intended to provide legal advice on any individual situation. Before taking any action involving your individual situation, you should seek legal advice to ensure it is appropriate to your personal circumstances.

 

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