Friday, 21 September 2012
Matrimonial Property Valuation -- Family Law Information
When to Value Matrimonial Property for the Purposes of Division
One thing I like to blog about are those questions you get asked all the time by clients or the misunderstandings that people have about the law that seem to have acquired "general acceptance" in society. The problem is that these understandings are sometimes wrong. The great thing about blogging is that you can address the same question to many people at the same time.
One issue that I have noticed a misunderstanding about is the time at which divorce lawyers value matrimonial property for the purposes of division in Alberta. This is a family law problem that our lawyers help clients with all the time.
This answer only applies to married couples, not common law couples separating. Very different principles can apply to common law couples because their ownership principles are often decided under trust law, usually constructive or resulting trusts. The reason for the difference is the Matrimonial Property Act of Alberta. This act only applies to persons who are legally married.
Section7(3)(a) of the Matrimonial Property Act essentially sets the date of valuation as the "date of trial". What this means practically speaking is that the assets will be valued at the time of consideration or the last possible point in time. Most matrimonial property disputes never make it to trial. Trials are far too expensive for the average person, so they end up settling through some form of negotiation or mediation. It is important to understand, however, that the assets will be valued at about the time of the settlement or the settlement meeting. That is the last point in time where the issue is relevant.
Many people assume that the value of assets to be used for division will be set at the time of separation. They feel that the day they breakup somehow sets the value of the asset. This is not true, unless both parties agree. In fact, it is not even the date of divorce that is relevant. Some people get divorced before they settle all their property disputes and they think that "this" must be the date, but no, it is the the last possible date for consideration.
The rationale for this is understandable. The breaking up does not change the fact that the asset is matrimonial property. It remains matrimonial property until is is divided or sold and the proceeds divided. Until then, any market fluctuation in the value of the asset will affect division. Why should either person be subject to market fluctuations and not the other? The basic principle of property division under the Matrimonial Property Act is simple: subject to some exemptions, there shall be an equal division of assets acquired during marriage. It does not matter in whose name the asset may be or in whose is in possession of the asset may be after separation. There is a continued equalization of the asset until division. In sum, both parties take the risk of market changes until the assets are finally decided.
It is section 7(4) of the Matrimonial Property Act that states that property acquired during marriage should be divided equally. This is a principle that is followed quite strictly by Alberta Courts. Section 8 of the Act does give some conditions to take into consideration when dividing equally. Section 8(f) of the Act states that the Court can take into consideration the fact that a party may have acquired an asset after separation when deciding the division of property. In my observation, however, it is almost impossible to invoke this provision to have the asset excluded from consideration because any assets acquired after separation generally would have required the use of matrimonial assets to purchase. In other words, if you take an asset that was considered matrimonial property and sell it after separation to buy another asset then you are using matrimonial property to acquire the asset, so the Court will consider that asset to be matrimonial property as well. In my observation section 8 of the Act does not provide reasons for an unequal division, but considerations to ensure an equal division. For example, the Court will not simply divide up the face value of the asset, it will take into consideration any tax consequences or the like to ensure each party is getting a truly equal division of assets. The purpose of section 8, in my opinion, is not to provide reason for an unequal division, but to ensure a equal division. Unequal divisions are rare and one has to loo elsewhere for those reasons.