Law Times

Law times • OctOber 22, 2012 Trust structure can help shelter matrimonial home FOCUS BY MICHAEL McKIERNAN Law Times T around the matrimonial home provisions of rusts lawyers say an Ontario Court of Ap- peal decision confirms spouses' ability to get Act by using a trust structure. In Spencer v. Riesberry, the the Family Law wife, Sandra Spencer, was a ben- eficiary of a trust set up by her mother that contained the four houses in which she and her siblings lived separately. On the mother' vided for the children to split the properties equally. Spencer lived in one of the s death, the trust pro- properties with her husband and two children until their separation. But during divorce proceedings, a trial judge found the property wasn't a matrimo- nial home under s. 18 (1) of the Family Law Act because Spencer had no interest in any specific asset held by the family trust. In a decision released June 19, the province' expressly provide otherwise, a beneficiary has no property interest in any specific asset of the trust, prior to or absent an appropriation of such asset to the beneficiary by the trustee, "Unless the terms of the trust s top court agreed. www.ERAssure.com wrote appeal court Justice Eileen Gillese for the unanimous three- judge panel. Speaking at an Ontario Bar " Association trusts and estates seminar on Sept. Vukelich LLP associate Jag Gan- dhi said insulating a high-value property from being labelled the matrimonial home could have a significant impact on calcula- tions of equalization payments from one spouse to the other. "In effect, the trust can be used 25, Wilson as a one-side marriage contract to exempt the family home from the restrictions imposed on mat- rimonial homes," she said. At Basman Smith LLP, part- ner Sarah Boulby tells Law Times the decision was perfectly in line with the case law on trusts but says it makes less sense in the context of family law. "From a family law perspec- monial home. If they choose to put it in the name of a company and they own the company, then it is a matrimonial home. But if they choose to put it in a trust, which is simply anther type of structure, then it' s a matri- ered a matrimonial home. It's s not consid- not very logical to have that kind of gap in family law. It might have been possible for the Court of Appeal to take a looser ap- proach to trust principles and fill the gap in the Family Law Act, but they've decided to say this is how trust law works and let the chips fall where they may on the family law front." Gandhi said the decision opens Untitled-2 1 "As a best practice approach on every case of advising a Testator or an Estate, lawyers should relay the availability of executor insurance to their clients." Mark Weintraub Clark Wilson LLP new avenues for estate planners dealing with family homes. "Parents who are purchasing homes for their children and want the property protected in the potential breakdown of their child' type of planning," she said. marriage could also use a well- structured trust to ensure a fam- ily home subsequently passes to the children from the earlier rela- tionship without using a marriage contract, according to Gandhi. "The key is before marriage, s marriage can look to this Clients considering a second in which the family home would be settled, and the beneficiaries could be one or more of the chil- dren," said Gandhi. "The client would get the right to occupy during their lifetime, so the cli- ent doesn't have an interest in the specific property for [Family Law Act] purposes. On the cli- ent' be distributed to the beneficia- ries. The second spouse would have no right s death, the property would to prevent this Putting the matrimonial home in a trust may violate the spirit of the Family Law Act, says Sarah Boulby. type of planning and the prop- erty would be beyond the scope of the spouse' reluctant to advise clients to en- gage in such structures because they may violate the spirit of the Family Law Act. "It doesn't seem quite right But Boulby says she remains s reach." to me because if the idea is to take rights away from the other spouse in a marriage, it seems the more open and direct ap- proach is to put it in a marriage contract," she says. "If it' you might find 10 years from now the provincial government changes the legislation." Robert Ballance, who acted for Spencer's husband, says his s seen as a loophole, client won't be appealing the de- cision any further. "He' but the costs and time associated with an appeal to the Supreme Court of Canada was not some- thing that could be undertaken," says Ballance. In court, Ballance argued Spencer's interest as a benefi- s not particularly happy, ciary of the trust set up by her mother, combined with her role as its co-trustee, should have been enough to establish an interest in the family home. But Gillese and her colleagues rejected that argument. "It is self-evident that the re- spondent's duties and powers as trustee are not an interest in the property within the meaning of s. 18 (1) of the [Family Law Act]. How could they be? She pos- sesses those powers and duties not in her personal capacity but in her fiduciary role as trustee, a role that requires her to act solely in the best interests of the beneficiaries," Gillese wrote. "The roles of trustee and ben- eficiary are distinct and must be maintained as separate and dis- tinct in order for the trust to be workable, entette of Windsor, Ont., firm Bartlet & Richardes LLP, says she and her client were both happy with the result. "It has some pretty signifi- Spencer's lawyer, Jean Mar- " she added. cant financial implications," says Marentette. "It' " LT higher court that the Family Law Act does not set aside traditional principles of trust law. s also a good statement by a Page 11 tive, it means if someone owns a house in their own name and lives in it with their spouse at the time of separation, it' The new best practice in estate law Protect yourself by protecting your clients with ERAssure Executor Insurance. The legal climate is changing in Canada, putting your executor clients at increased risk of being sued. As an estate lawyer, you consequently face greater risk as well in two main ways: 1. If the executor does not have adequate resources or insurance to cover their liability, you and your professional E&O coverage could be the next target for a claim from the beneficiaries. 2. If you have failed to communicate to your executor clients about their personal liability and the availability of executor insurance, they could sue you if they have an uninsured claim for damages. Put ERAssure between your client and your professional E&O coverage — on every estate. Call 1-855-636-3777 to book a 10-minute orientation about implementing this best practice today. ERAssure is the exclusive Preferred Supplier of executor insurance for Canadian Bar Association members ERAssure is a registered trademark of Estate Risk Protection Plan Inc. www.lawtimesnews.com 12-10-15 12:12 PM

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