Property Division – Tricky Stuff aka What You Don’t Know CAN Hurt You
This is the second blog from Kevin Hannah Q.C. on the division of property. In September, we looked at the general principles involved with the division of property. This month we are going to list some of the common tricks and traps involved with the division of property on relationship breakdown.
There are far too many examples of property or debt issues that are complicated and tricky – it would be impossible to list them all. Some are counter-intuitive. Believing that you understand all you need to understand to negotiate a fair property division is inviting an unfair result that may come back and bite you. Some common trouble spots can cost people a great deal. Here are some things to think about when discussing division of property:
- If the closed mortgage on your home has years left on the term – meaning there may be a penalty on an early payout of the mortgage (such would occur on a sale) – do you take that penalty into account in the property division?
- If one spouse keeps the home they lived in and the other takes the rental home with the same fair market value, as they a wash? Is one worth less than the other for tax reasons?
- If a tax liability related to an asset is latent (not yet realized) and it may never become realized in the meaningful future, do you take that latent tax into account now?
- How are RRSPs to be tax discounted so they can be equated with a TSFA? What if they likely won’t be cashed for many years?
- Should we use date of separation or date of negotiation values for assets and debts? If separation, what do we do with assets that have significantly risen or fallen in value since then?
- Should realtor fees be deducted from the matrimonial home when valuing it, even if a sale is not expected in the near term?
- Should we take the date of separation, or the depreciated value since then of the other spouse’s car?
- Is a pension property even if it isn’t even vested and won’t be in pay for years, if ever?
- How do we value the family business? Who gets to keep it?
- How do we value private company shares? Does it make a difference if we own less than half?
- What do we do when future tax laws change in a way we didn’t expect?
- Can my RRSPs, already split with my spouse, also be income for support purposes when I cash them in?
- Should we remain co-owners of some of our property even if we’re getting a divorce?
- Should I take assets that are likely to become future income if I’m probably paying my spouse support in the future?
- What if my spouse invested in crypto currency and lost most of it? Do I share the loss?
Etc. Etc.
The ‘right answer’ to the above questions may be defined by law, may be defined by the courts, or it may depend on the specific circumstances of the parties involved.
The moral of the story is this: negotiate property division with your eyes open. Minimize your risk with legal advice. We are experts at navigating the risks associated with the division of property and we would be pleased to discuss those with you.
