Cartier v. Cartier – Deductions and Exclusions in the Equalization of Net Family Properties

When determining a party’s net family property, assets that the person acquired by inheritance and/or gift are eligible for exclusion. Furthermore, the Family Law Act allows the exclusion of property that can be traced to this asset. That is, a person can exclude an investment that was purchased with funds from an inheritance. Until the instant case, any such excluded asset that was used to purchase any property that is jointly owned by the parties lost its eligibility for exclusion. In Cartier, the Ontario Superior Court of Justice broke this trend and determined that, in certain circumstances, the spouse who received the inheritance or gift may still be entitled to exclude their half of the jointly owned property.

In Cartier, the parties were married for 23 years. During the marriage, the husband inherited some farmland from his mother. In 2004, the parties sold this land and put a portion of the proceeds into a joint investment account, while they became joint creditors on debts for the remaining profits. As mentioned above, the husband’s inheritance would ordinarily have qualified him for an exclusion from his net family property under section 4(2) of the Family Law Act. Similarly, any asset that was purchased with the proceeds of inherited property would be excluded under section 4(5) of the Act. However, the fact that the husband placed the proceeds of the sale of the inherited farm into jointly held assets should have defeated his claim for such an exclusion. The Court preferred the evidence of the husband, who stated that he intended for each party to have 50% of the value of these assets. This intention makes this case different from its predecessors in that previous cases dealt with assets that could be traced to excluded property which were intended for the “common purposes of the family”. The husband’s clear intention that the value of the newly acquired assets would accrue in equal shares to each party is definitive proof that they were not for the common purposes of the family. Additionally, previous litigants have attempted to rebut the presumption that assets held in the parties’ joint names are jointly owned, which is set out in section 14 of the Act. Instead, Mr. Cartier accepted that the assets are jointly owned and, therefore, only claimed an exclusion over his half of the assets. For these reasons, the Court saw fit to allow Mr. Cartier to exclude the value of his half of these assets for the purposes of calculating his net family property.

This Post Has 2 Comments
  1. This case represents an interesting and novel shift in the way that Courts deal with the question of excluding certain assets that were acquired during the marriage. Because it represents a shift from other cases dealing with the issue of exclusion, it is an important one for spouses who acquire excludable assets during the marriage.

    The result in this case is interesting in that the Wife receives a simultaneous benefit and disadvantage from the Court’s decision to allow the Husband to exclude half of the value of the farm property. On the one hand, the Court is giving the Husband the benefit of excluding his half of the value while the Wife has to include her half of the new assets in her Net Family Property. The effect of this decision is that the Husband reduces his Net Family Property while the Wife’s is increased by no fault of her own. However, the Court could have allowed the Husband to deduct the entire value of the asset which would have affected the Wife much more negatively.

  2. This decision is reasonable and represents a sensible approach to the issues of excluding and deducting assets from a party’s Net Family Property. However, the fine distinction between deductions, which are used to remove pre-marriage assets from their Net Family Property, and exclusions, which result in the removal of certain assets acquired during the marriage, is very confusing for litigants. The issue of exclusion, as is demonstrated by this case, often requires Judges and lawyers to engage in the complex exercise of tracing property. That is, where an excluded asset is liquidated and/or put into a new type of property, the Court has to discern where the proceeds of the asset went and the value of same at the Valuation Date. Therefore, I believe that the Legislature should amend the Family Law Act such that there are no more exclusions. Instead, the value of those assets specified in the Act would be deducted from that party’s Net Family Property. This would mean that the party’s NFP would be reduced by the value of the asset when it was acquired, thereby removing the need to trace liquidated assets and eliminating the possibility for such a deduction to be lost by placing into a jointly owned asset. This would make the process of equalizing the parties’ Net Family Properties much simpler and more straight-forward. For example, if one person inherits $500,000.00 then that money would be treated as a deduction of $500,000.00 in the same way as a date of marriage asset and the tracing would no longer be necessary. This would also have the advantage of both parties being able to share in the growth of the asset and removing the concern from the person that received the inheritance that they must trace the money which may create tension in the marriage.

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