Divorce (Family Law) and Accident Benefits
April 1, 2008
By Joanna Harris
How is property divided between married spouses?
Upon divorce in Ontario, the Family Law Act operates to equalize certain property between married spouses. Many people believe that in Ontario the property is shared 50/50 between divorcing spouses. This is not accurate.
The Ontario Family Law Act provides for an “equalization of net family property” so that upon separation, the married spouse whose “Net Family Property” is the lesser of the two net family properties is entitled to one half of the difference between them. In short a person’s net family property is the difference between their net worth on the date of marriage and the date of separation with certain qualification which are beyond the scope of this article. The statutory definitions applicable are as follows:
- “Property” includes any interest, present or future, vested or contingent, in real or personal property.
- “Net Family Property” is the value of all the property that each spouse individually owns on the “valuation date”, after deducting the following:
- the spouse’s debts and other liabilities as of the valuation date; and
- the value of property, other than a matrimonial home, that a spouse owned on the date of the marriage, after deducting the spouse’s debts and liabilities.
The Family Law Act seeks to equalize each married spouse’s increase in net worth created during the marriage. This does not apply to unmarried spouses.
WHAT IS NOT INCLUDED IN NET FAMILY PROPERTY?
Certain types of property may be excluded from a spouse’s “net family property” under the provisions of the Family Law Act under the definition of excluded property and include, “damages or a right to damages for personal injuries, nervous shock, mental distress or loss of guidance, care and companionship, or the part of a settlement that represents those damages”. Again, a full explanation of the concept of what “excluded property” under the Family Law Act is beyond the scope of this article.
This exclusion from “Net Family Property” can apply even if the damages have been used to acquire other property as long as the subsequent property is not a matrimonial home and the damages can be traced into the property acquired using the excluded property.
Generally speaking, in personal injury litigation, there are two major types of damages: damages for pain and suffering and damages for loss of income. While damages for pain and suffering are clearly excluded, there is an issue as to whether an entitlement to a future income stream or the component of damages relating to future income loss will be considered property between married spouses.
Under the Family Law Act the exclusion of damages is intended to permit spouses to retain property that is “completely personal” to them, and to which they are entitled for the purpose of replacing “some aspect of their enjoyment of life which cannot be truly shared with any other individual, no matter how close the relationship”.
Accident benefits are not explicitly excluded by section 4(2)3 of the Family Law Act, but have been held by the courts to be excluded property. It is important to note that the burden of proving the right to exclude property lies on the spouse who claims it. If properly argued, accident benefits should be excluded from the calculation of the recipient’s net family property. Damages for future loss of income may not be “property” if needed to satisfy a claim by the other spouse for spousal support: Question whether that will apply of there is no claim for spousal support.
Will accident benefits be included in the calculation of a payor’s income for support purposes?
Upon divorce or separation in Ontario, spouses, married or unmarried, may have an additional entitlement under the Divorce Act or the Family Law Act respectively to spousal support. In addition, children always have an entitlement to support from both their parents.
Although accident benefits may be excluded from the calculation of “net family property” as described above in relation to Family Law Act property claims as between married spouses, accident benefits may be included in the calculation of a spouse’s income for the purposes of determining ability to pay spousal or child support. This concept applies to both married and unmarried spouses.
This article provides a general overview of the treatment that certain issues will receive in the family law context. Your specific situation should be discussed with a family law lawyer as the scope of this article does not permit a full explanation of the concepts and their application.
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