Family Trusts Under the Family Law Act

People are turning more frequently to family trusts for estate and tax planning purposes. While trusts are good tools for this purpose, care needs to be taken to examine how those trusts may be handled by the Courts when beneficiaries of the trust face their own marital separation. 

The Family Law Act that came into force on March 18, 2013 states that a beneficiaries' interest in a family trust is an excluded asset, not subject to division. The growth of the value of the assets held by that trust, however, may be subject to division. This will prove problematic where beneficiaries are unable to force the creator of the trust to pay out the division, and where there may be multiple beneficiaries to the trust. The beneficiary is normally not entitled to liquidate the assets of the trust, resulting in a problematic situation where the former spouse may have a claim that the beneficiary is unable to pay. Part of the solution may be to require beneficiaries to have marriage agreements that set out how the family trust will be treated upon marital breakdown.

If you are considering setting up a family trust, entering a relationship as a beneficiary of a trust, or are facing separation and are concerned about the treatment of your interest in a trust, contact Paine Edmonds LLP for a consultation to discuss what options are available to you. 

Changing Your Names on Accounts and Designations on Separation

This is an American article published by Forbes, therefore not all of the advice applies to our Canadian clients. However, it is important at the time of a separation to put your mind to things that should be changed immediately, such as beneficiary designations, bank accounts and automobile insurance. 

If you are considering or facing a separation, come see us at Paine Edmonds to discuss what steps you need to take to protect yourself and your loved ones. 

Admissibility of Facebook Posts

In the recently released decision of K.M. v. J.B., 2013 BCSC 2041, the Honourable Mr. Justice Butler considered the admission of Facebook postings obtained by the wife, who had accessed the husband's Facebook account with his password, given to her during the parties' relationship. The Court admitted the postings, finding that the evidence was reliable and not private, as it was broadcast to an audience who could share the posts. The Court said:

[6]             Prior to setting out the facts and my analysis of these issues, I must provide my ruling on an evidentiary issue that arose early in the trial. The claimant wished to make reference to screen shots she took of the respondent's Facebook pages. The respondent took the position that these were inadmissible on the basis they were private and had been obtained either illegally or wrongfully. The postings showed the respondent's activities at times when he was supposed to be exercising access according to the interim order. The postings also contain some negative comments about the claimant and information about the respondent's work. I indicated to the parties I would hear the evidence to consider the question of relevance which has a bearing on admissibility.

[7]             The law regarding wrongfully obtained evidence in family disputes was thoroughly canvassed in Mathews v. Mathews, 2007 BCSC 1825. At para. 43, Barrow J. succinctly summarized the proper approach to admissibility of such evidence:

From the foregoing, it is clear there is a limited discretion to exclude relevant evidence in this context.  The judicial exercise of that discretion involves a balancing of competing interests which can be usefully viewed as assessing the probative value of the evidence as against its prejudicial effect.  It does not involve the application of the Charter per se.

[8]             In Mathews, the evidence was admitted in circumstances where the father entered the mother's room surreptitiously and removed a diary from a locked box. The court concluded the actions of the father, while not illegal, amounted to a violation of the mother's privacy. The evidence was admitted as it was reliable and probative and there was no prejudice to the trial process. The existence of prejudice created by the "odious" practice of secretly intercepting private communications was offset by the prejudice that would arise by excluding the evidence. The administration of justice favours the admission of probative reliable evidence which is relevant to the best interests of the children.

[9]             In the circumstances of this case, I have no hesitation in ruling the evidence is admissible. It is relevant to the parenting question I must consider. The postings are reliable as they are the respondent's own comments to his circle of friends. Unlike the situation in Mathews and other cases which have considered this issue, little prejudice arises here from the manner in which the communications were obtained. The respondent gave his Facebook password to the claimant when they were together. After they separated he knew she still had it. The claimant admitted she probably should not have been looking at his account, but he was aware she could do so. Further, his postings were not truly private communications. They were available to be seen by a group of friends and could have been shown to others or passed on by the recipients. In these circumstances, the respondent had no real expectation of privacy in his postings.

[10]         There is no possible other prejudice in these circumstances. Indeed, the interests of justice would not be served if the court could not consider evidence which is relevant to the best interests of C.B. Exhibits A through D are accordingly admitted in evidence.

Return of the Engagement Ring

CBC reports on a couple who were fighting over ownership of the engagement ring after the relationship went sour (find the CBC story here). Generally, jewelry, including engagement rings, are considered gifts and are not property to be divided or returned on the breakdown of the relationship. In rare occasions, the Court will order the return of the ring, in circumstances where there appears to have been no real intention to marry or the jewelry is considered a promotional item, worn to impress others about the status of the couple. 

Rarely is it ordered that an engagement ring be returned and most lawyers will advise their client against going to Court on this issue alone.  In situations where there are other matters at issue, the party who gave the ring can ask for its return as a part of an alternative dispute process, however, if the matter goes to Court it is unlikely that the Court will order its return as they are seen as personal property and not assets. 

When Mental Health Becomes a Childcare Issue

The case of Allyson McConnell (read about her case here), the woman who was convicted in Alberta of drowning her two young sons in her bathtub, highlights the challenges faced in divorce when one party suffers from mental illness. In cases where there is a concern about a person's capacity to care for children due to mental illness, there are tools available to assess and examine fitness to parent. If the applying person can demonstrate that there is a genuine concern, their lawyer can demand medical records relating to the issue and request a custody and access report be issued by a qualified professional, who will review records, interview the parties and the children, and make recommendations for a parenting plan that addresses concerns respecting safety and care of the children.

The challenge with these expert reports is cost: these reports can cost upwards of $10,000. There are alternatives to using these reports, so if you are on a more limited budget, ask your lawyer to discuss how you can ensure that these concerns are raised and addressed. Where there is an established foundation of a risk to the children's safety, using paid or family supervisors during access can be a way to alleviate concerns until the health issues are adequately addressed.

Aquilini Divorce Reaches Settlement and Highlights the Benefits of Out-of-Court Settlements

The high profile divorce of Canuck's co-owner Francesco Aquilini has been settled out of court on the eve of trial. Click here for CBC's report. As with all cases, but particularly high profile cases which may attract more readers, an out-of-court settlement is desirable and it maintains the privacy of the parties. Divorce cases can result in substantial disclosure of private information into the public domain. Many people are surprised to discover that even a chambers application can result in a publicly reported decision that can be accessed and read by anyone with a computer. The only way to keep this information out of the public domain is to reach a settlement, as Courts are reluctant to grant orders prohibiting public access to a Court hearing or result. 

In addition, courtrooms are generally accessible to the public. Anyone who is not a witness in a trial is welcome to come and sit through a trial or hearing, where the details of someone's greatest life challenges are brought out in this public forum. The new Family Law Act that came into force on March 18th of this year encourages out of court settlement, and privacy concerns are just one reason. Out of court settlement, if possible, is considered in the best interests of the parties, as litigation is not only a massive financial burden for the parties to bear, but it often causes such substantial damage to the relationship between the parties that future cooperation, especially with respect to children, is compromised. 

At Paine Edmonds we always strive to reach an out of court settlement wherever possible. 

With divorce trial about to begin, Francesco Aquilini moves to protect privacy

Understandably, Fancesco Aquilini is concerned about the level of exposure that all details of his personal and professional life will suffer when his 6-week trial commences on Monday. See the article here: With divorce trial about to begin, Francesco Aquilini moves to protect privacy

Disclosure in Family Law Cases

Financial disclosure is an issue that arises in all family law files. Whether there are issues respecting child or spousal support, or if there are assets and debts to be divided, financial disclosure is a foundation step before lawyers are able to advise their clients on these issues. The first stage usually involves the completion of a Financial Statement, which is a formal document that lists the parties’ assets and debts, as well as their income and expenses. Come to your lawyer prepared to complete your Financial Statement, which should attach your last three years’ income tax returns and Notices of Assessment, your last three paystubs from any employment, as well as any available statement for each asset and debt listed in your name or for which you are responsible. Depending on the issues on the file, more disclosure is often required and sometimes those obligations can be onerous. For example, several years of account statements may be required if there is a concern that there has been a wasting or transferring of assets. If there is a family business or significant shares in a corporation, significant disclosure may be required respecting the dealings of that corporation, such as interim and historical financial statements, funds paid to non-arm’s length persons (such as family members), bank statements and inventory and asset lists.

Many clients find the disclosure requirements to be cumbersome and invasive. This is a natural reaction to the litigation process and is one of the components that leads to litigation fatigue. However, avoiding disclosure obligations will often result in the opposing party making a court application for the documents that they seek. If the documents are deemed to be relevant to an issue in the case, the Court will likely order its production. In addition to paying your lawyer’s legal fees, you will likely be ordered to pay some of the costs of the other party, and in the most egregious of cases, a fine of up to $5,000, as set out in section 213 of the Family Law Act.

Early in your case, at Paine Edmonds we will have a discussion with you respecting disclosure and what your obligations will be as your file proceeds. Your file will likely resolve quicker and at less cost if you are proactive in obtaining the disclosure that your lawyer advises will likely necessary. Attempting to avoid your obligation to disclose information will often result in increased costs, but may also injure your credibility, which is one of your most important assets down the road should you ever be in trial.

Further, the new Family Law Act takes into consideration assets and debts existing at the beginning of the relationship, as well as any gifts or inheritances received during the relationship. The party that brought those assets into the relationship may be able to take their original value back out of the asset pool prior to the remaining assets being divided between the parties. Subsequently, some investigative work may be required to obtain the proof necessary of both the ownership and value of those assets at the start of the relationship, as the onus lies on the party that wishes those assets to be exempt from division to prove their original value and ownership. The more documentation that you bring into your meeting with your lawyer, the more equipped your lawyer will be to advocate for you effectively and resolve the issues on your file.

Entitlement to Spousal Support - Not a Guarantee

The recent British Columbia Supreme Court considered an application by a husband for spousal support of his wife of 20 years. The wife, a school principal, earned $120,000 per year while the husband earned less than $12,000 per year as an uncertified fitness instructor. The parties had accumulated significant debt during their marriage that left little equity in the family residence once those debts were satisfied.

The husband argued that, due to the disparity in incomes, he had need that justified spousal support. The husband argued that he was permanently disabled from a previous motor vehicle accident. However, his  evidence was contradicted at trial by the surveillance video of a private investigator, that showed him engaging in significantly taxing activities. The husband provided no medical evidence other than his own testimony to support his claim that he was permanently disabled.

In denying the husband spousal support, and requiring him to repay his wife all support received while waiting for trial, the Court found that he was not entitled to support as he had made no reasonable effort to find suitable employment or advance his career.

http://www.courts.gov.bc.ca/jdb-txt/SC/13/12/2013BCSC1227.htm