Top Six Trust Issues in Family Law
Sarah Boulby | Download as PDF
The trust is a powerful equitable concept originally developed in the context of family interests. This tool devised by upper class English families to protect their patrimony from falling into the clutches of their daughters’ husbands has evolved into diverse uses in the contemporary economy. As family lawyers we still see trusts used by high net worth families although perhaps now more for tax deferral than for the traditional reasons. We also see many more trusts used as part of a business structure by professionals and by closely held businesses. Tax deferral and estate planning remain the prime purposes for settling trusts. These are reasonably widespread as is the misinformation about them amongst the general public. It is not uncommon to meet a client who has re‐organized her assets so that a significant portion has been settled on a trust for minor children and who is apparently surprised to learn that this means the assets are actually no longer hers to do with as she wishes. The decision to settle assets on a trust has particular consequences in family law primarily in equalization cases but also in the determination of child support. This paper looks at six topics of particular concern, which are: (1) When and how is trust income considered for child support purposes? (2) Is a family residence held inside a trust a matrimonial home under the Family Law Act with all the implications that carries? (3) When is a trust a sham? (4) What is the borderline between legitimate estate planning and avoidance of family law obligations when a trust is settled? (5) Is a beneficial interest in a discretionary trust a property interest under Part I of the Family Law Act? And, (6) if it is a property interest how should it be valued?
When and how is trust income considered for child support purposes?
The starting point for income under the Child Support Guidelines is line 150 of the payor parent’s income tax return. Some trust disbursements are taxable and will appear on the beneficiary’s return. It is entirely possible, however, for the tax to be paid within the trust. Furthermore it is not entirely past imagination that in some cases trust income will be manipulated to try to avoid inclusion into income for child support purposes. To guard against this the Guidelines provide in s.19(1)(i):
s. 19(1)(i) Imputing Income – The court may impute such amount of income to a spouse as it considers appropriate in the circumstances, which circumstances include the following…
(i) the spouse is a beneficiary under a trust and is or will be in receipt of income or other benefits from the trust.2
The intriguing jurisdiction to order that income be imputed to a beneficiary who “will be in receipt of income or other benefits from the trust” is potentially quite broad. Having said that, case law interpreting this section is sparse in the extreme which may reflect the relative rarity of these fact situations arising or the difficulty in obtaining the disclosure needed for parties to be in a position to ask courts to make orders under this provision.
In an early decision shortly after the introduction of the Guidelines, Jackson v. Jackson the court ordered a parent to pay interim child support based on the receipt of a capital payment from a trust. The court found a substantial history of capital being used to support the family lifestyle and on that basis justified imputing income to the payor income as a result of a capital payment.3
In V.(L.) v. B.(E.), a British Columbia Provincial Court imputed income to a payor spouse who was the income beneficiary of a family trust (the 14th Viscount Mountgarret Will Trust) and also a discretionary capital beneficiary. The Court included in the payor’s income not only the monthly income that he was actually receiving on a regular basis from the trust but an additional amount to reflect the fact that the trustees had a history of making capital distributions to the payor from the trust, not least to cover his legal expenses in the matrimonial litigation.4
On the other hand, in Paniccia v. Butcher, an Ontario court refused to impute income to the payor parent based on capital withdrawals from a testamentary trust fund. In that case, the court instead imputed income to the payor spouse for under employment.5 The availability of another avenue to ground a support order may have played an influence in the result. In essence the existence of a trust fund in both V.(L.) v. B.(E.) and Paniccia v. Butcher arguably enabled the payor parents to avoid work or make less efforts to contribute to their own support.
In Waese v. Borjman, the Madam Justice Mesbur imputed income to the beneficiary of a testamentary trust.6 In that case the support payor mother was the beneficiary of a testamentary trust along with the children. The trust had not made any disbursements to the payor mother but the trustees did have the authority to make such disbursements if the mother’s income from other sources fell below a fixed amount. Given that the mother’s other income was below the limit set by the trust terms the court imputed income to her to the maximum amount allowable pursuant to the trust. The children were also parties to the proceeding and sought orders against the trust alleging that the trustees had failed to exercise their discretion properly. The children sought distributions from the trust. Mesbur J. ordered that these issues in the application be transferred to the Estates list. In the Estates court the proceeding continued with an order for disclosure and an order that the trustees pay interim disbursements of $150,000 to the children. Cullity J. in Estates Court concluded based on the record before him that it was probable that one of the trustees had not recognized his fiduciary obligation to the children and had not exercised his discretion properly.7 This interesting case appears to have settled as there is no final decision in the record.
There is a paucity of decided cases on when and how trust income should be imputed to a support payor in a child support case. In part that is self‐fulfilling as the lack of a fully developed jurisprudence deters claimants, even those with strong cases, from venturing into court. No doubt another factor is that substantial family trusts are likely to exist in families that have access to legal advice and an interest in privacy which may discourage litigation. Arbitrated cases leave no footprint in the public record. A further impediment to pursuing such claims may simply be a lack of information. In Waese v. Bojman disclosure was ordered but it can be difficult to obtain information about the assets and income of a trust in a case in which the beneficiary parent has not been receiving disbursements from the trust. The beneficiary may not have the relevant documents and information within his or her control. If the trustees refuse to cooperate the other spouse may resort to a motion for third party disclosure pursuant to the Family Law Rules.8 Where the third party has allied interests with the payor parent there is a higher chance that a court will order production than when the third party is a true “stranger” to the litigation.9 The trustees of family trusts may well share close ties with a beneficiary. The costs and uncertainty of pursuing third party disclosure, however, is likely a deterrent to parties advancing these claims. Without such disclosure a claim to impute trust income to a beneficiary payor parent will fail for lack of evidence.
(2) Is a family residence held inside a trust a matrimonial home under the Family Law Act?
Matrimonial homes receive special treatment under the Family Law Act both with respect to possessory rights in Part II of the Act and to exclusions and date of marriage deductions under Part I of the Act. A recent decision of the Ontario Superior Court in Spencer v. Riesberry (which is currently under appeal) concerns the character of a family home held within a trust.10 In this case, the parties at separation resided in a family home owned by the Spencer Family Realty Trust (“the trust”). The wife was one of the trustees of the trust at the time of separation along with one of her siblings. The beneficiaries of the trust were the wife and her siblings. At the date of marriage the trust held the parties’ family home. At the date of separation the trust held the parties’ family home as well as the family home of each of the beneficiaries in the trust. The wife’s mother had a life interest in the property. At the mother’s death the property of the trust is to be distributed equally amongst the beneficiaries. The trust deed provides, however, that there should be no distribution to a beneficiary if the result of that distribution would be that the beneficiary’s share should form part of his or her net family property. The wife takes the position that her beneficial interest in the trust does not form part of her net family property and, furthermore, that the family home is not a matrimonial home as defined in the Family Law Act. The husband takes the position that the property is a matrimonial home, that the wife’s interest does form part of her net family property and that the term in the trust deed that purports to exclude the beneficial interest from the wife’s net family property is not effective.
I turn first to the question of whether the family home is a matrimonial home under the Act. “Matrimonial home” is a defined term in the Family Law Act. S. 18 provides:
18(1) Matrimonial home – Every property in which a person has an interest and that is or, if the spouses have separated, was at the time of the separation ordinarily occupied by the person and his or her spouse as their family residence is their matrimonial home.
(2) Ownership of shares – The ownership of a share or shares, or of an interest in a share or shares, or a corporation entitling the owner to occupy a housing unit owned by the corporation shall be deemed to be an interest in the unit for the purposes of subsection (1).
The question is whether a beneficial interest in a trust is sufficient to fall within the scope of “interest” employed in paragraph 18(1) of the Act. In Spencer v. Reisberry Mr. Justice Scott Campbell held that the wife as beneficiary of the trust has an interest only in the trust itself. She has no interest in the family home which is a specific property held by the trust. In reaching this conclusion, Campbell J. relied on the decision in Clarke v. Read Estate. In that case the wife transferred title to her home which she owned before her marriage to a trust. She then resided in the property with her spouse. In that case Panet J. held that the wife did not have an interest in the property under s. 18(1) and, as a consequence, that the property was not a matrimonial home.11 In Clarke v. Read Estate, Panet J. made an express finding of fact that the wife had made the transfer because she wished to avoid the home becoming an asset of the marriage and she wished to leave it on death to her daughter from a prior relationship. Clarke v. Read Estate was decided over a decade ago but has had no citations until Spencer v. Riesberry this year. The lack of cases in which this question arises is surprising as, if upheld, Clarke and Spencer reveal a significant gap in the Act vulnerable to exploitation by those who wish to circumvent the special treatment of the matrimonial home. It is difficult to understand the policy distinction between homes that are held through corporations and homes that are held through trusts.12
In Debora v. Debora, the Court of Appeal gave an expansive reading to s. 18(2) to interpret the section as encompassing a home owned by a corporation if the spouse holding shares in the corporation has a controlling interest to enable the spouse to vote those shares so as to provide a right of residence for the spouse and family. One could argue that similarly “interest” in s. 18(1) be interpreted broadly to include a property held by a trust in which a spouse is beneficiary if that trust’s purpose is to house the spouse and his or her family. Such an interpretation stretches the boundaries of trust law somewhat but no more than the interpretation in Debora stretches corporate law. The Court of Appeal in Debora interpreted the definition of s. 18(2) by drawing on the approach of recent family law cases in which the court has pierced the corporate veil.13 A similar rationale might apply in the trust context at least in cases in which there is evidence of an attempt to circumvent the operation of the Family Law Act. A plain reading of the facts in Clarke v. Read Estate suggests just such an intention on the part of the wife. If, on the other hand, the result in Clarke v. Read Estate is correct then it means that the main impetus for many marriage contracts entered into by those who simply wish to protect an interest in their home owned at the date of marriage are not necessary and the same result can be achieved unilaterally by settling the asset on a trust. I question such a result.
(3) When is a trust a sham?
The mandatory disclosure required of both spouses at the end of a marriage is often the occasion for bad financial planning or, at times, dishonest financial planning to surface. Sham trusts are one such dubious practice that may be exposed in a family law proceeding. To establish a trust requires three certainties: the certainty of intention, the certainty of subject matter and the certainty of objects. A sham trust is one in which the settlor does not truly intend to dispose of the assets settled on the trust but rather, simply wishes to create the impression that the assets have been disposed of while maintaining control of them. Without a clear intention to dispose of the asset or assets on a final basis one of the three certainties is missing and with it the trust is void. This situation comes to light in numerous aspects of family law practice. A parent may have ostensibly transferred assets to a trust for the benefit of their children without intending, or even appreciating, that means the loss of his or her control and ownership of the assets. A spouse may have settled assets onto a trust for the benefit of his or her spouse during the marriage in order to minimize taxation or to protect assets from creditors without having the intention of truly disposing of the assets. This may reflect a lack of probity on the part of the settlor or, sometimes, no more than having acted on poor advice from a financial planner or accountant who does not properly understand the nature of a trust.
In Duca Financial Services Credit Union Ltd. v. Bozzo, the Court of Appeal found a trust to be a sham in the context of a bankruptcy proceeding. The respondent, Bozzo, settled a trust in 1988 confirming that he held shares in a company in trust for his wife. The company defaulted on a loan guaranteed by the respondent who was petitioned into bankruptcy in 1994. The trial judge accepted the respondent’s submission that he intended to separate himself from ownership of the shares even though he continued to maintain operational control of the company as an employee. However, this result was overturned by the Court of Appeal based on the respondent’s admission at trial that he believed that he had voting control of the company even after the date of the Trust Declaration. He acknowledged that in his mind control of the company was not altered by the trust.14
That a settlor may not rely on the form of a trust was confirmed by the Federal Court of Appeal in Antle v. R. In that case, the trial judge concluded that the respondent Mr. Antle had no intention to settle a discretionary trust but rather simply signed documents provided by his financial advisers with the goal of avoiding Canadian tax. The court held that Mr. Antle did not intend to lose control of the shares settled on the trust nor access to the ultimate profits. Indeed the trial judge held: “…I have not been convinced [Mr. Antle] even fully appreciated the significance of settling a discretionary trust
beyond an appreciation for the result it might provide.” At the appellate level, Antle did not challenge this finding of fact but submitted that the court could not go behind the trust deed itself which impeccably described a proper discretionary trust. The Federal Court of Appeal dismissed Mr. Antle’s appeal and reaffirmed the longstanding jurisprudence that a court may look to not only the words of a trust deed but all of the surrounding circumstances.15
In the trenches of family law practice that settlors of trusts fail to appreciate the significance of settling a trust is perhaps the rule not the exception. If the principles enunciated in Duca Financial and Antle are to be properly applied in the family law context counsel need to investigate the circumstances of the settlement of any trust by a spouse to ensure that the trust is not void. If the trust is a sham then the underlying assets will need to be included in the party’s net family property along with any related tax liabilities
An example of the principle that the court should consider the actual circumstances rather than the formal documentation of a trust is found in Anderson v. Dudek. In this case the cohabiting spouses had acquired a property in joint title. Some years after acquiring the property Anderson signed a declaration of trust that she held the property in trust for the benefit of Dudek. Metivier J. held that this was a sham trust. In this case the deed did not delineate any objects to the trust. In any case, Metivier J. found that the settlor was either misled or did not understand the purpose of the trust document, thereby vitiating intention.16 As the trust was a sham, the applicant wife regained her joint beneficial interest in the property.
Di Manno v. Di Manno considers a sham trust from the perspective of the beneficiary. In this case, the husband alleged that the 20% beneficial interest that he held in a property to which his parents had legal title should be excluded from his net family property because he feared that the tax authorities would not accept the validity of the trust. The trial judge rejected this argument, finding that the possibility that the Canada Revenue Agency might not accept the legitimacy of the trust did not mean that the husband could not enforce the trust agreement against his parents if he so chose.17
(4) What is the borderline between legitimate estate planning and avoidance of family law obligations?
Trusts are a legitimate means for estate planning. While courts will take a particularly close look at a trust settled during a marriage that results in a significant transfer of wealth out of a spouse’s hands it may survive such scrutiny. An example is Hockey‐Sweeney v. Sweeney, in which during the marriage the respondent husband set up a trust for the benefit of his children.18 The trust held the shares of a holding company that owned the shares in his businesses. The husband’s brother was the trustee. The trial judge held that the wife knew about the trust, approved of its creation and knew what was in it. The fact that the trust was created well before the parties encountered marital difficulties was also an important factor in the finding that the trust was valid.
In Easingwood v. Easingwood Estate, the British Columbia Supreme Court upheld an alter ego trust settled during a marriage. In this case, the husband developed dementia. Two of his children from his first marriage acted for him pursuant to a power of attorney. Acting under the power they settled the bulk of his assets on an alter ego trust. The trust had parallel terms to their father’s will, including terms for the benefit of his second wife. The wife and husband had entered into Marriage Agreement restricting their claims against one another. The court found that the trust was valid as the children had acted for legitimate planning purposes and in accordance with the terms of the husband’s will. The court rejected the wife’s argument that the trust was a fraudulent conveyance on the grounds that she could not establish that she was a creditor under the relevant British Columbian family legislation as the relationship was intact. The court distinguished this case from the decision of the Ontario Court of Appeal in Stone v. Stone in which a terminally ill husband had restructured his affairs to negate the wife’s equalization claim19. In Stone although the wife had not commenced an application against the husband he was aware she would contest his will, thereby crystallizing her role as a creditor and invoking the protections of the fraudulent conveyance legislation. In the result, although the wife was a beneficiary under the alter ego trust she lost the right to have access to statutory claims against the husband’s estate that she otherwise would have had. The fact that the parties had entered into a Marriage Agreement that the wife did not challenge weighed heavily on the outcome of this case.20
In, Spencer v. Reisberry the trust of which the wife was a beneficiary came under scrutiny because it contained an express term that imposed a condition that any benefit that the wife might receive from the trust cannot fall into community property or form part of her net family property. The wife relied on this provision as a reason that her beneficial interest should not be included in her net family property or, in the alternative, a term that diminishes the value of her interest. Campbell J. held that this trust term was an attempt to impose a condition subsequent on the gift and that the condition is vague. The term is not placed in the operative section of the trust nor is it clear when the restriction is activated. Is it effective at the time the trust is created, during the currency of the trust or at the time of its disposition? Nor is there any provision for what should happen to the beneficiary’s share if lost. There is no clarity on whether or not a beneficiary may fall in and out of entitlement under this term as his or her circumstances change. For these reasons Campbell J. found the condition void for uncertainty. When a condition subsequent is found to be invalid, the gift is absolute without restriction.21
As Campbell J. had resolved the issue based on the uncertainty of the condition it was not necessary to address the broader challenges to this trust term raised by Mr. Reisberry. It was clear that the purpose of the trust deed was to avoid the application of the Family Law Act. If the condition had been drafted effectively then it could potentially provide a means for a spouse to exempt property from the normal rules for date of marriage deductions and exclusions under Part I of the Act without the need to negotiate a marriage contract with the other spouse, and, in fact without even the knowledge of the other spouse.
A condition that is contrary to public policy is void. A condition in a trust that interferes with a marital relationship is contrary to public policy. Domestic contracts are themselves only valid as creatures of legislation.22 The question is does using a trust to circumvent the operation of Part I of the Family Law Act falls into this category of conditions void for public policy? On this point, Campbell J. commented in obiter:
The respondent argued that the proviso contained in section 1.1 [the condition] offends public policy. Courts have been reluctant to stop a person from disposing of property in a way that that person thinks is best. However the courts will not enforce conditions having regard to the greater interest (Waters’ Law of Trust in Canada). These included conditions which restrain a person from marrying, interfere with a husband and wife’s relations or meddle in the discharge of parental duties.
It may be that in a broader, more modern sense, para 1.1 does attempt to limit or interfere with some of the rights created by the FLA. However, it does not specifically limit marital relationship in the manner that has been previously impugned by the courts. I do not make my decision on public policy reasons.23
Although it was not necessary for Mr. Justice Campbell to resolve the question in Spencer v. Reisberry, this is another issue that the courts will have to wrestle with. Either trusts are a convenient way to avoid the operation of Part I of the Family Law Act without the time, trouble and expense of a marriage contract, or such attempts are impermissible unilateral attempts to remove legislated property rights.
Key to each of these cases is the intentions of the parties involved. Family lawyers should examine the surrounding circumstances of any substantial disposition of assets by settlement of a trust to ensure that it is legitimate and, if in question, gather the relevant evidence. Where trusts are settled there should be a significant body of evidence in the files of the lawyers and accountants who assisted in setting up the trust which may be definitive evidence of the purpose of the exercise.
(5) Is a beneficial interest in a discretionary trust a property interest under Part I of the Family Law Act?
Oddly enough, twenty five years after the introduction of the Family Law Act the basic question as to whether or not a beneficial interest in a discretionary trust is property pursuant to Part I of the Act has not been definitively answered. We do have strong indications that such an interest is a property interest subject to equalization and I see that as the better view, however, there remains an active dispute. The statutory definition of “property” in the Act is very broad. It provides:
“property” means any interest, present or future, vested or contingent, in real or personal property and includes,
- property over which a spouse has, alone or in conjunction with another person, a power of appointment exercisable in favour of himself or herself,
- property disposed of by a spouse but over which the spouse has, alone or in conjunction with another person, a power to revoke the disposition or a power to consume or dispose of the property,
- in the case of a spouse’s rights under a pension plan that have vested, the spouse’s interest in the plan, including contributions made by other persons.24
Although broad, the definition of property is not without limitation. In Lowe v. Lowe, Mr. Justice Sharpe writing for the Court of Appeal observed: “In keeping with the “modern” approach to statutory interpretation, s. 4 should not be read as including any and every interest, even those bearing no relationship to the marriage partnership, simply because that interest is not specifically excluded.”25 The limits to the definition are to be found in the context of its legislation and goals.
In the early decision of Brinkos v. Brinkos , the Court of Appeal found beneficial interests in trusts to be property.26 Even if the terms of the trust provide that the receipt of the benefit of the trust is postponed, it is still property. An example was the decision in Black v. Black in which the husband’s grandfather left him shares in a company but under the terms of the grandfather’s testamentary trust, these shares did not vest in the husband until after the date of marriage.27 A residual interest as capital beneficiary in an estate has also been found to be a property interest.28 The argument that a family trust is no more than an estate planning device and should be treated as no different from a party having been named as beneficiary in a will has been rejected.29
The trustees who have the authority to distribute among beneficiaries must exercise their discretion but what cannot be determined in advance is which of a number of beneficiaries of a trust will receive distributions and in what share. There are cases of interest in other jurisdictions and under other statutes but the legislative differences may be significant enough to make them distinguishable. In Kachur v. Kachur, the Alberta Court of Queen’s Bench held that beneficial trust interests were property but, on the facts of that case, the children owned the entire interest in the trust property.30 In Grove v. Grove, the British Columbia Supreme Court included the husband’s trust interest into family assets for division but dealt with the uncertainty of the interest by ordering an if and when division.31
In Ontario the most frequently cited discretionary trust decision is that of Madam Justice MacDonald in Sagl v.Sagl. In that case the parties conceded that the interest was property and merely disputed the value of the interest.32 That concession was eminently practical and, I suspect, correct but the jurisprudence would have benefitted from a full exploration of the issue and a resolution. We do have the decision of Scott J. in Durakovic v. Durakovic, in which the wife’s residual trust in a family trust was not included in her net family property. That decision lacks clarity as for some reason there was no evidence or argument led as to the value of the asset. Without such a value it would seem impossible for the court to have included the interest in the wife’s net family property. In any case, Scott J. reviewed the Ontario disability benefits case, Ontario (Director of Income Maintenance, Ministry of Community and Social Services) v. Henson in which the Ontario Divisional Court found that a beneficiary did not have a beneficial interest in a discretionary trust because she could not compel the trustees to make payments to her.33 That finding, however, was directly tied to the language of quite different legislation and in a very different context. Nevertheless, Scott J. found the decision of “some assistance in isolating the essential element required for the contingent interest to be property for a spouse – either control or an ability to fall within the criteria that would require a trustee to provide funds in certain exigent circumstances.”34 It is not clear how to reconcile this formulation of the essential element to what is property with the inclusion in the statutory definition of contingent assets which by their definition may be beyond the spouse’s control.
We are still waiting for the definitive Ontario case on this issue. In the meantime, my view is that these interests do fall within the very generous ambit of the definition of property under Part I of the Family Law Act but that they are subject to substantial contingencies on value. The beneficiary of a discretionary trust has rights as against the trustee to have his or her interests and needs considered. The trustees are imposed with fiduciary duties. Beneficiaries of discretionary trusts are likely, although not certain, to receive tangible value from their interests. As such, in the context of family law legislation it seems appropriate to include the interests in equalization.
(6) if it is a property interest how should it be valued?
The case law on valuation of discretionary trust interests remains as undeveloped as the primary question of their nature. Under the Family Law Act “value” may be the value to owner rather than fair market value.35 The trustees of a discretionary trust may chose to disburse nothing to a beneficiary or to allocate all or virtually all the trust assets to the beneficiary. In some cases there is a history of payments which provides some guidance but not in all cases. Any attempt to value a discretionary trust interest stumbles against the reality that the beneficiary may receive nothing from the trust. On the other hand, as with the proverbial goose who lays golden eggs, the beneficiary would presumably not surrender the interest for nil value.
The leading decision on this question is still Sagl v. Sagl. In that case the husband was a beneficiary of a discretionary trust and also a trustee with the power to appoint or remove trustees of the trust. He was a required member of any majority decision of the trustees. The other beneficiaries were his children and grandchildren. Madam Justice MacDonald valued the husband’s interest by taking the deemed realization of the trust as of the valuation date and then allocating the value between all capital beneficiaries equally. There were five capital beneficiaries at the date of marriage and seven capital beneficiaries at the date of separation. MacDonald J. included the value of one‐fifth of the trust in the husband’s assets as of the date of marriage and one‐seventh as of the date of separation.36 Although the approach is somewhat arbitrary, it has the benefit of being easy to apply. The risk, as with any contingent interest included in an equalization calculation, is that the estimated value will turn out to be inaccurate. The spouse who has a beneficial interest may, with hindsight, have overpaid or underpaid. There does not seem any way around this problem as we have clear direction from appellate courts that if and when divisions are not consistent with the legislative scheme of Part I of the Family Law Act.37 It should be noted, however, that in Sagl, the husband had considerable control over the trust as trustee. If a beneficiary did not have such control or there was a historical pattern of other beneficiaries receiving a disproportionate share of disbursements from the trust those would be relevant to the allocation of value.
A review of the uses and misuses of trusts in family law is impeded by the lack of a fully developed jurisprudence on many issues and, perhaps, a lack of awareness by family lawyers of areas in which the case law is clear, such as that on sham trusts. One hesitates to call for litigation as it causes such misery to those parties directly involved but in the absence of a more developed jurisprudence the only alternative on some of these issues is legislative reform to clarify the Family Law Act. My view is that in the context of family law legislation, which is remediative in nature, the use of family trusts to circumvent the operation of family law legislation should be discouraged. It is entirely possible for parties to openly contract out of the statutory obligations under the Act, whether that be with respect to special rights for the matrimonial home, exclusions or deductions. Those parties who have family trusts are likely to be the most legally sophisticated. They clearly have access to legal and accounting advice. From a policy perspective it would make sense to place the onus on those who wish to avoid the operation of the Act to use domestic contracts rather than the trust mechanism. Whether that is the direction that the courts will take on these issues remains to be seen.
- This paper was first delivered at The Law Society of Upper Canada’s The Six Minute Family Law Lawyer 2011 Program
- Federal Child Support Guidelines, s. 19(1)(i)
- Jackson v. Jackson (1997), CarswellOnt 4717 (Ont.C.J.)
- V.(L.) v. B.(E.) (2000), CarswellB.C. 3050 (B.C.Prov.) at 12
- Paniccia v. Butcher (2003) CarswellOnt 1753 (Ont.S.C.) at 9
- Waese v. Bojman (2001) CarswellOnt 1813 (Ont.S.C.)
- Waese v. Bojman (2002) CarswellOnt 5216 (Ont.S.C.)
- Family Law Rules, R. 19(11) and 20(5)
- Ontario (Attorney General) v. Ballard Estate (1995), 26 O.R. (3d) 39 (Ont.C.A.) re: s. 30.10 of the Rules of Civil Procedure. This case was cited with approval by Mr. Justice Nelson in a case under the Family Law Rules in Noik v. Noik(2001) CarswellOnt 324 (Ont.S.C.J.) at 31.
- Spencer v. Riesberry(2011) ONSC 3222 CanLII, appeal to the Court of Appeal pending. In the interests of full disclosure I have been involved on behalf of the Respondent husband in this case at the lower level.
- Clarke v. Read Estate2000 CanLII 22457 (Ont.S.C.)
- Debora v. Debora (2006) CarswellOnt 7633 (Ont.C.A.)
- For a discussion of the context of the Debora decision see Berend Hovius “The Family Home: Legal Treatment in Ontario” (2010) 29 C.F.L.Q. 119 at 8
- Duca Financial Services Credit Union Ltd. v. Bozzo (2011) CarswellOnt 4816 (Ont.C.A.), leave application to the SCC pending.
- Antle v. R. (2010) CarswellNat 3894 (Fed.C.A.)
- Anderson v. Dudek(2011) CarswellOnt 11680 (Ont.S.C.) at 18‐19
- Di Manno v. Di Manno(2002) CarswellOnt 3655 (Ont.S.C.) at 5
- Hockey‐Sweeney v. Sweeney (2004) CarswellOnt 4422 (Ont.C.A.) at 5
- Stone v. Stone(2001) CarswellOnt 2781 (Ont.C.A.)
- Easingwood v. Easingwood Estate (2011) CarswellBC 2297 (B.C.S.C.)
- Spencer v. Reisberry, at 9
- Waters, Law of Trusts, supra at 255‐257
- Spencer v. Reisberry, at para. 59‐60
- Family Law Act, s. 4(1), Note that para. 4(1)(c) has been amended with the new provision to come into force on January 1, 2012. The new definition of a pension interest is not relevant to this discussion.
- Lowe v. Lowe, (2006) CarswellOnt 153 (Ont.C.A.) at 8
- Brinkos v. Brinkos (1989) CarswellOnt 2341 (Ont.C.A.)
- Black v. Black (1988), CarswellOnt 323 (Ont.S.C.)
- Da Costa v. Da Costa (1992), CarswellOnt 257
- Di Manno v. Di Manno, supra, at 5
- Kachur v. Kachur (2000) CarswellAlta 1112 (Alta.Q.B.)
- Grove v. Grove,  B.C.J. No. 658 (B.C.S.C)
- Sagl v. Sagl (1997), CarswellOnt 2144 (Ont.Gen.Div.)
- Ontario (Director of Income Maintenance, Ministry of Community & Social Services) v. Henson (1987) O.J. No. 1121 (Ont.Div.Ct.)
- Durakovic v. Durakovic (2008) CarswellOnt 5329 (Ont.S.C.) at 34
- Buttrum v. Buttrum(2001) 15 R.F.L. (5th) 250 (Ont.S.C.), Ward v. Ward(1999, 44 R.F.L. (4th) 340 (Ont.Gen.Div.)
- A similar approach was taken in Kushnir v. Lowry(2004) CarswellOnt 530 (Ont.S.C.) at 12
- See Ross v. Ross (2006) CarswellOnt 7786 (Ont.C.A.) and Best v. Best(1999) CarswellOnt 1995 (S.C.C.) at 66