Toronto Family Lawyers Assisting with Inheritance and Wealth Protection

Family members are often financially interdependent. Assets and incomes intermingle without regard to legal forms or obligations, and particularly without considering a future change in family status. Motivations shift over time, however, along with family dynamics. While there is a temptation to shy away from addressing the awkward possibility that spousal relationships between family members may break down over time, it makes good sense to consider family law repercussions and, where possible, protect against unwelcome outcomes. This is particularly important for families with significant assets to protect.

At Boulby Weinberg LLP, we are exceedingly experienced with high-asset family disputes involving complex business structures, trusts and international property considerations. We can help advise on best practices in terms of structuring financial arrangements now and create marriage and cohabitation agreements to address the division of assets later, should it become necessary.

Thinking Strategically About Family Law & Wealth Protection

In Ontario, married spouses have a right to share in wealth generated during a marriage, subject to certain restrictions. This sharing of wealth is achieved by applying a legislative formula, the equalization calculation. The calculation requires valuation of each spouse’s assets at the date of marriage and the date of separation. There are restrictions on the wealth sharing as some assets, such as those gifted or inherited during the marriage, are excluded from equalization. If gifted or inherited assets are owned at the date of the marriage, however, any increase in their value is shared. Matrimonial homes also have special treatment in the equalization calculation. Spouses may contract out of equalization rights through a marriage contract, but it is imperative for these agreements to be scrupulously negotiated with full financial disclosure and independent legal advice for both spouses.

Most Common Issues Related to High-Net Worth Families

The Matrimonial Home

If a married couple own and reside in a family home or multiple homes, including a cottage or ski chalet, for example, at the end of the marriage the property or multiple properties are matrimonial homes, which receive special treatment. A matrimonial home will not be excluded from equalization even if the property was received as a gift or inherited during the marriage. If the same matrimonial home or homes were owned at the date of marriage and at the date of separation, the spouse who owns it will not receive credit for having brought the property into the marriage. There are special considerations for homes owned through corporations or trusts. This applies even if one spouse owned the home prior to the marriage or inherited or was gifted the home during the relationship.

“Date of Marriage” Valuations

Generally, assets brought into a marriage by either spouse will remain theirs after separation. To calculate the value of all the assets and liabilities held by each spouse at the time they were married and at the date of separation can be an expensive exercise requiring expert advice. For date of marriage assets and liabilities, it may be an impossible exercise if the marriage occurred long ago as documents may be irretrievably lost. Aside from these logistical problems, there is no provision in the equalization calculation to protect the growth in value of an asset brought into the marriage. This means the increase in value of an asset over the course of the relationship will be shared. For example, a spouse may bring a business into a relationship which has nominal value at the date of marriage but has grown exponentially in value during the relationship. Although the spouse owned the asset before marriage most of the value of that asset must be shared with the spouse.

Inherited/Gifted Assets

Assets gifted to or inherited by a spouse during a marriage are excluded from the equalization calculations unless they are consumed or mingled in jointly held accounts. To keep a gift or inheritance separate, the spouse receiving the funds should be sure to keep them in a separate bank account. If an inheritance is added to a joint savings account, there is a risk that the exclusion may be lost.

Spousal & Child Support in High-Net Worth Separations & Divorces

Spousal Support

The determination of spousal support is largely guided in Canada by the calculations set out in the Federal Spousal Support Advisory Guidelines.. However, when one or both parties have very high incomes, the courts exercise a greater degree of discretion in setting the quantum of spousal support.

Child Support

In addition to the basic monthly child support, parents must share special and extraordinary expenses, which can be significant in high income families. Expenses such as private school, extracurriculars and post-secondary education will be shared in proportion to the parents’ respective incomes. The responsibility to pay child support extends beyond the age of 18 while an adult child remains a dependent, potentially through graduate degrees including medical and law school in higher income families.

Calculating Income for High-Net Worth Individuals in Family Law

As child and spousal support are both income-based, the calculation of income is critical. Income for support purposes is calculated on a different basis than for tax purposes. Income from all sources is taken into account including salary, corporate dividends, investment income whether interest or capital gains, pre-tax corporate income for a company of which the spouse is a shareholder, director or officer, and trust income. Income may be imputed to a spouse in a number of situations including:

  • Intentional underemployment;
  • Residence in a country with lower tax rates than in Canada;
  • Where the spouse’s property is not reasonably utilized to generate income; or
  • Where a spouse is a beneficiary under a trust and is or will be in receipt of income or other benefits from the trust.

Family Wealth Transfers

The technical rules related to family property law usually come into play at the end of a spousal relationship. During the marriage, family members may transfer assets or funds to children or grandchildren without giving much thought as to the form or even substance of the transfer. Whether it is intended to be a gift or a loan may be unclear to the parties even at the time. Years later, seen through the partisan lens of a failed marriage, it may be difficult to determine whether a transaction was a gift or a loan which can become a point of dispute in a separation or divorce. Decisions made without regard to whether a property is, or may become, a matrimonial home may lead to unwelcome consequences.

When is a family loan valid and enforceable?

Payments by family members to spouses during marriages may not be clearly identified at the time of the advance. Post-separation one spouse may have a strong incentive to characterize payments as a gift, while the other wishes to characterize the payments as a loan. There are a number of relevant factors in determining whether a payment was a gift or a loan:

  • Whether there were any contemporaneous documents evidencing a loan;
  • Whether the manner for repayment is specified;
  • Whether there is security held for the loan;
  • Whether there are advances to one child and not to others, or, on the contrary, equal advances;
  • Whether there has been any partial repayment; and
  • Whether there was an expectation or likelihood of repayment.

Boulby Weinberg LLP: Experienced at Protecting Wealth and Avoiding Conflict

At Boulby Weinberg LLP, we have considerable experience working with high-net-worth families in a variety of family law disputes. We are skilled at navigating complex financial arrangements, family trusts, and international property matters to ensure our clients preserve their rights and protect their assets whenever possible. We will advise on structuring finances to protect your assets and work to secure your rights in a divorce or separation.

Contact Boulby Weinberg LLP to Protect Your Wealth & Inheritance in a Divorce

Families with significant assets to protect require a family lawyer who understands their needs and can effectively protect their rights in a complex dispute. At Boulby Weinberg LLP, we have extensive experience assisting divorcing couples with securing their assets and routinely advise on wealth protection measures before, during and after marriage.

To arrange a consultation with a knowledgeable lawyer at Boulby Weinberg LLP, please complete our confidential online questionnaire, which will provide you with valuable preliminary information tailored to your situation. A representative from our firm will contact you within one business day to discuss your matter further and arrange an initial meeting. To contact our firm without completing the questionnaire, please reach out to us online, or call us at 647-494-0113 ext. 102.

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80 Richmond St. West, 18th Floor
Toronto, ON M5H 2A4

T: 647-494-0113
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