Presentation on theme: "Trusts Under the New Family Law Act The Relevant Sections of the Family Law Act and Their Effect on Trust Property Fiona M. Beveridge."— Presentation transcript:
Trusts Under the New Family Law Act The Relevant Sections of the Family Law Act and Their Effect on Trust Property Fiona M. Beveridge
Family Property 84 (1) Subject to section 85 [excludedproperty], family property is all real property and personal property as follows: (a) on the date the spouses separate, property (i) that is owned by at least one spouse, or (ii) in which at least one spouse has a beneficial interest
Family Property S. 84 captures trust property itself as opposed to the beneficial interest Whether a spouses beneficial interest is property will depend on nature and terms of the trust Vested or contingent interest generally property Discretionary interest not generally property
Excluded property 85 (1) The following is excluded from family property: (e) property referred to in any of paragraphs (a) to (d) that is held in trust for the benefit of a spouse; (f) property held in a discretionary trust (i) to which the spouse did not contribute, (ii) of which the spouse is a beneficiary, and (iii) that is settled by a person other than the spouse;
Excluded property S. 85 excludes broad categories of trust property derived from pre-relationship property, gifts, inheritances, personal injury awards and insurance policy proceeds S.85 also excludes property held in certain discretionary trusts
Control Over the Trust Property 84(3) Despite subsection (1) of this section and subject to section 85 (1) (e), family property includes that part of trust property contributed by a spouse to a trust in which (a) the spouse is a beneficiary, and has a vested interest in that part of the trust property that is not subject to divestment, (b) the spouse has a power to transfer to himself or herself that part of the trust property, or (c) the spouse has a power to terminate the trust and, on termination, that part of the trust property reverts to the spouse.
Control Over the Trust Property S. 84(3) refers to the control a spouse may have over trust property It appears to include in the definition of family property trust property where a spouse may not be a beneficiary but contributed property to the trust and retains control over the property
Valuation of the Interest 84 (2) Without limiting subsection (1), family property includes the following: (g) the amount by which the value of excluded property has increased since the later of the date (i) the relationship between the spouses began, or (ii) the excluded property was acquired.
Valuation of the Interest The increase in the value of excluded assets is included in family property This is where the problems arise: –The growth in the value of the property must be determined –What do you do where there are beneficiaries other than the spouse?
Valuation of the Interest The section includes the growth of excluded trust property rather than the growth of a spouses interest in the trust property. It effectively expropriates the interests of any third party beneficiaries in favour of the non-beneficiary spouse There are proposals to amend this section
Valuation of the Interest If the legislation is amended to take into account the spouses interest, there is still a valuation problem How much is the spouses interest? This is a particular problem where the trustee can exercise discretion in favour of one beneficiary over the others
Where to Go From Here? Currently, the legislation has left uncertainty It appears the legislation will have to be amended to deal with the uncertainty There is still concern that it will not eliminate the valuation concerns that existed under the FRA