Forgivable Loans – Are they Income or Property?

Date: 04 May, 2016| Author: Fred Streiman

In another blog article, we discussed Restricted Share Units (RSU). These are examples of a golden handcuff by an employer to buy the loyalty of an employee. Another example of such golden handcuffs are forgivable loans. These are commonly offered to financial planners who move from one large investment house or bank to another. The book of business the planner brings to the Investment house is a valuable asset that they do not want to lose. An example of this situation is that upon such a move, the planner receives a “loan” as an example of $500,000.00, forgiven at the rate of $100,000.00 per year. For each year that the financial planner remains with the new employer, $100,000.00 of the loan is forgiven.

The courts and family law lawyers have grappled with how to treat such loans. The money (loan) is all received at a single time, and is available to the new employee to use as they see fit. Of course, hovering in the background, is the possibility that if the employee leaves, then the unforgiven part of the loan will have to be repaid. The amount of course is dependent upon the terms of the loan and how long the new employee has remained.

An argument is that all of this money, as it is directly in the hands of the new employee, should be treated as income, for support purposes, in the year in which it is actually received. Alternatively if the proceeds of the forgivable loan can be identified as of the date of separation, it should be an asset to be equalized.

This confusion has been cleared up in the case of Rogers v Rogers, a decision of Justice Young of the Ontario Superior Court. Justice Young held that only the amount each year that is forgiven is to be included as income. Only that portion that will be included in the financial planner’s taxable income in the year in question was to be treated as income, despite the fact that all of the money was already sitting in the financial planner’s bank account. By extension if it is income it is not property subject to equalization. Technically this would be accomplished by simply listing the offsetting portion of the part of the loan that has not been forgiven.

Common Law Property Rights – This Time She Lost and Why

Date: 22 Mar, 2016| Author: Fred Streiman

Why you Need a Co-habitation Agreement

Thumbnail-LogoWe have posted a number of blog articles already on the topic of property rights between common-law couples. As a prime example, when does a common law spouse acquire an interest or claim against property (often a home) of the other spouse.

The catch phrase in justifying these claims is the court finding a joint venture between the common-law spouses. This is largely fact driven and in this humble author’s opinion, is an expression of what is “fair” dressed up in expensive judicial language. The results of such a claim are never certain and the authors of the relatively mathematical formula for married couples found in the Family Law Act, are not happy with this relatively new torturous process.

In the recent Superior Court decision in Reiter v Hollub, Justice Polack decided such an application. The common-law couple had lived together for six years. The house always was in the common-law husband’s name, but increased by over $400,000.00 during the time the parties lived together. The common-law wife paid $400.00 per month, plus some other contributions towards the household expenses. She made a single $5,000.00 payment towards the mortgage.

The parties shared responsibilities for the household, but largely otherwise kept their financial lives separate and apart. After what was no doubt a significant investment in legal fees (I would not be surprised if the two parties together spent the better part of $100,000.00 to get to the point where a judge’s decision was received), the court found, sorry, we do not believe that there is a joint venture, there was no economic integration and the common-law wife never met the threshold. Looked at from afar by the average person on the street, she simply did not do enough, did not pay enough and the parties did not jointly act together enough for there to be a finding that she had been treated unfairly by not getting an interest in the common-law husband’s home.

When starting such a file, these facts are never that simple or straight forward and the importance of a cohabitation agreement screams loudly. Assuming such a cohabitation agreement would have cost the common-law husband $3,500.00 at the outset, he could have saved himself a great deal of emotional and financial misery. If his common-law spouse was not prepared to sign an agreement safeguarding his sole interest in the home, then he would have received at the beginning, rather than the end of their relationship, a clear signal that this just is not going to work.

Not only could the domestic contract have protected the common-law husband’s interest in the home, but it could have answered at the beginning, rather than at the end of the relationship, what common-law spousal support obligations were being incurred between the parties.

Dale Streiman Law LLP understands that spending thousands of dollars at the beginning of a relationship the everyone believes will last forever and simply cannot fail, is a hard pill to swallow, but life happens. Generally 50% of all relationships end unhappily and to act otherwise is to roll the dice which are generally tilted in favour of the house.

Lump Sum Arrears Payment of Support – Is It Tax Deductible

Date: 01 Dec, 2015| Author: Fred Streiman

Thumbnail-Logo            Child support for many years, is neither tax deductible on the part of the payor nor subject to tax in the hands of the recipient.  However, spousal support payments have always and continue to attract this tax treatment.  Specifically, if you are paying spousal support, you get to deduct that and if you are receiving spousal support, you must declare it as income and is subject accordingly to taxation. This is only fair and often can free net tax dollars between the spouses and make the payment of spousal ever so slightly less painful.

However, for  a very long time, catch up arrears payments have not enjoyed such treatment.  As an example, if one has failed to make the periodic spousal support payments they are required to, and then catches up in one lump sum, often the lump sum payments does not enjoy the same tax treatment.  The recipient was not required to declare these lump sum payments as support and the payor was not able to deduct them.

In 2013, the tax court, in the case of James v. R. decided that such a payment was indeed subject to tax.  However, CRA continued to ignore that decision and had continued to apply its original view of a lack of deductibility of such payments.  However, CRA in various recent tax bulletins has now accepted the tax court’s decision.

However, a single lump sum payment not attributed to retroactive support or the payment of arrears, continues not to attract such treatment, ie. no tax.  This is often taken into account when the parties negotiate the resolution of the quantification of such arrears or often the court will take this into account when calculating such a payment.  The specific CRA income tax folio S1-F3-C3, updated effective March 5th, 2015, replaces interpretation bulletin IT-530R.  An important change in tax law on must be cognizant of.

Marh/Mahr or Islamic Marriage Contract

Date: 16 Nov, 2015| Author: Fred Streiman

Thumbnail-LogoIn an interesting decision in January 2015, Justice Walters refused to recognize a Marh/Mahr written entirely in Arabic.  The Husband and Wife were born in Afghanistan and Iran respectively.  They were married in a Muslim ceremony in Germany, where the Marh/Mahr was signed.  However, neither party spoke, wrote or read Arabic.  Neither party received independent legal advice before signing the Marh/Mahr.  The court found that the husband did not understand the nature of what he was signing, it was unclear in which currency the Marh/Mahr was to be paid in and it could not be said that the parties knew what they were agreeing to and indeed that they were agreeing to be bound by the terms of the agreement.  The Marh/Mahr was set aside and is not enforceable in Ontario. To the contrary, there is a long running series of cases that people who (especially those that are educated and sophisticated) sign documents without ever bothering to read them or get any advice as to their effect, do so at that their own peril.  This decision is contrary to that stream of cases.

Clearly, the enforceability of Marh/Mahr is not a clear or simple task and requires a fine legal hand in steering the client through this legal minefield.

Complying with Financial Disclosure in Family Law Proceedings

Date: 03 Nov, 2015| Author: Fred Streiman

Thumbnail-LogoThe obligation to comply with financial disclosure orders in a family law proceeding is a serious one. It may seem obvious that full and frank financial disclosure is the starting point with respect to any discussion or negotiation of issues arising out of separation such as child support, spousal support, and equalization of property. However, not all family law clients are open and honest with their lawyers, making it difficult to comply with such disclosure orders.

This important issue was raised before the Ontario Court of Appeal in Roberts v. Roberts, 2015 CarswellOnt 9247 (Ont. C.A.). In this case, the husband did not comply with three court orders for financial disclosure. The lower court struck his pleadings and allowed the wife to proceed with an undefended trial. The husband appealed, and much to his surprise, the Court of Appeal upheld the lower court’s decision.

Justice Benotto, on behalf of a unanimous Court of Appeal stated:
The most basic obligation in family law is the duty to disclosure financial information. This requirement is immediate and ongoing.
Failure to abide by this fundamental principle impedes the progress of the action, causes delay and generally acts to the disadvantage of the opposite party. It also impacts the administration of justice. Unnecessary judicial time is spent and the final adjudication is stalled. Financial disclosure is automatic. It should not require court orders – let alone three – to obtain production.

The power to strike out the pleadings is to be used sparingly and only in exceptional cases. This is such a case. The appellant’s conduct in ignoring court orders and failing to follow the basic principles of family law litigation put him in the exceptional category of cases where the judge’s discretion to strike his pleadings was reasonably exercised.

Recently, the Ontario Family Law Rules have been amended to provide for the production of immediate financial disclosure to the opposite party via the requirement to file a Certificate of Financial Disclosure. The Roberts case teaches us that a court will not look favourably upon a party who is not upfront and honest when it comes to financial disclosure. Moreover, it is counsel’s duty to make it clear to their clients that they cannot play hide and seek when it comes to providing relevant financial disclosure. The repercussions of not doing so can be significant and expensive.

What is Nesting?

Date: 02 Oct, 2015| Author: Fred Streiman

Thumbnail-LogoNesting is a parenting arrangement in which the matrimonial home will be “shared”  by the spouses after separation. The children remain full-time in the home, while the parents take turns living elsewhere. The sharing happens on a rotating basis, usually on a week on/week off basis.

In a recent case, Veljanovski v. Veljanovski, 2015 CarswellOnt 9263 (Ont. S.C.J.), both parents were seeking exclusive possession of the matrimonial home on an interim motion. The judge chose to create a nesting arrangement where the children remained in the home. Each parent was allowed to have exclusive possession of the home from Saturday to Saturday. Each parent was required to pay half the expenses of the home and provide for the children during the week that they had possession of the home.

There are arguably pros and cons to every residential arrangement following separation. In the case of nesting, a pro is that it provides stability for the children. It is less disruptive for the children’s lives as they remain in the same home, school, activities etc. However, it can be costly as each parent has to secure their own alternative accommodations as well as maintain the matrimonial home. The nesting arrangement is also likely more appropriate in cases where parents are cooperative with each other.

There are a number of residential arrangements for children post separation that can be explored. If you are interested in speaking to a lawyer about this issue please contact the Family Law department at Dale Streiman Law LLP.

Education, Negotiation, Formalization

Date: 11 Aug, 2015| Author: Fred Streiman

Thumbnail-LogoOften clients approach us having no idea what their entitlement is upon separation.  They do not necessarily have a high conflict situation but they are starting from a point of almost complete ignorance.

Often the solution is that they spend an hour or two with an experienced family law lawyer, who analyzes their situation and provides them with an “education” as to what their rights are and what is an approximation of a fair settlement.

In an effort to save money, the next stage of “negotiation” is often undertaken by the client themselves who sit down with their spouse, and with the framework provided by “education”, are able to reach an agreement on the basic points outstanding between husband and wife.

Lastly, there is the important step whereby the agreement produced by the “negotiation” now requires “formalization”.  That formalization almost always leads to a formal Separation Agreement.  A Separation Agreement normally encompasses and settles all the issues outstanding between separating parties with the exception of a divorce which can only be obtained by way of a court application.  Quite frankly, it is this formalization step that actually is far more important than the almost formal end to a marriage, obtained by way of a divorce.  In essence, the Separation Agreement, which often can stretch to over 30 pages, can cover everything from soup to nuts.  A divorce obtained often by the party who wants it more than the other, will often alone foot the bill for the divorce.

This three step process is commonly undertaken by the family law lawyers at Dale, Streiman Law LLP where the issues are relatively straight forward and both parties are willing to recognize that it is in both of their best interests to handle their matters in a mature fashion.

Do Grandparents Have Automatic Rights to See Their Grandchildren?

Date: 13 Jul, 2015| Author: Fred Streiman

Thumbnail-LogoAccording to the Ontario Family Law, a grandparent does not have an automatic right to see a grandchild. It is generally up to the child’s parents to decide whether the child will see a grandparent or other extended family members. Although there have been efforts to make grandparents’ rights a priority for the court, the law maintains that a grandparent is legally in the same position as any other non parent who has a close relationship with the child. The rights of the child’s parents, including their right to decide who has access to the children, are assumed to be much greater than grandparents’ rights.

In a recent case before the Ontario Superior Court of Justice, namely, Nichols v. Herdman, 2015 CarswellOnt 9262 (Ont. S.C.J.), the grandparents sought access to their young grandchild aged two. Prior to the conflict, the grandparents had a close relationship with the child and helped care for the child regularly. However, a conflict escalated between the mother of the child and the grandparents, which resulted in the mother cutting off all ties between the parties.

Justice Stevenson found that although the grandparents had a positive relationship with the grandchild, and while the decisions of the parents had jeopardized the relationship between the grandparents and the grandchild, the parents did not act arbitrarily or not in the child’s best interests.

It is quite clear that these kinds of cases do not belong in a court room. These matters belong in the capable hands of a family therapist and/or mediator who can understand and work with the conflicting views, whilst trying to maintain some kind of a relationship between the grandparent and the child without shattering all the relationships involved.

Parent’s Obligation to Pay Support for Children over the Age of 18

Date: 03 Mar, 2015| Author: Fred Streiman

The Child Support Guidelines stops being an automatic formula for calculating child support once a child exceeds the age of 18.

The obligation to pay support for an adult child can be found in both the Divorce Act and the Family Law Act, but generally requires a child to be attending school on a full time basis or in the case of the Divorce Act, a child who is a dependent due to disability or an attendance at a post-secondary educational institution.

Unfortunately in family law, children at times chose sides, sometimes unfairly. The estranged parent has the right to not only demand proof that their child is enrolled in a full time post-secondary educational institution, but are actually attending. There are a number of important cases on this point, including the recent decision in the Alberta Queens Bench by Justice Deit, Lewis v Correia. There is also the Ontario Superior Court of Appeal case in Lewi and also the Ontario case of Durso v. Maseherin.

An adult child has an obligation to make some contribution towards their post-secondary educational expenses. It is the remainder that fulfills definition of a Section 7 extraordinary expenses, which is to be paid for by the parents in proportion to of their respective incomes.

Of course, at the other end of the spectrum we have wholesome parent/child relationships, which rise above the separation of the parents in which both parents put the needs of their children first and are able to set aside their differences. It is this author’s observation that custodial arguments over the University expenses of their children more often than not are a reflection of an emotional difficulty on the part of one of the parents rather than a reflection of a real financial contest.

Simply put, this is not a simple area of law and often an experienced Family Law Lawyer such as those at Dale Streiman Law LLP are needed to guide you.

Can a Parent Relocate with a Child on a Temporary Basis?

Date: 04 Feb, 2015| Author: Fred Streiman

An interesting, recent case was brought before the Ontario Court of Justice on the issue of relocation on a temporary basis. In Boudreault v. Charles, 2014 CarswellOnt 7523 (Ont. C.J.), the mother moves to relocate to Montreal with her 3 year old child by way of an interim motion. It is not without doubt that she has a compelling case. The father has been convicted of assaulting the mother while she was holding the child. He has only had supervised access visits with the child. To add to this, he is in great default of child support and a costs order.

A diligent review of case law shows that this is certainly not the first time this issue has been brought before the courts. For example, in Plumley v. Plumley, 1999 CarswellOnt 3503 (Ont. S.C.J.) the court set out the follow principles on relocating with a child:

a) A court will be more reluctant to upset the status quo on an interim motion and permit the move when there is a genuine issue for trial.

b) There can be compelling circumstances which might dictate that a justice ought to allow the move. For example, the move may result in a financial benefit to the family unit, which will be lost if the matter awaits a trial of the best interests of the children or the best interests of the children might dictate that they commence school at a new location.

c) Although there may be a genuine issue for trial, the move may be permitted on an interim basis if there is a strong possibility that the custodial parent’s position will prevail at trial.

Taking Plumley and other leading cases into consideration, Justice Sherr in Boudreault states that the court must also consider the best interest factors set out in subsection 24(2) of the Children’s Law Reform Act (the Act) and any violence and abuse in assessing a parent’s ability to act as a parent as set out in subsections 24(3) and (4) of the Act.[1]

At paragraph 29 of his decision, Justice Sherr comes to the conclusion that the trial result would be inevitable and that it is in the child’s best interest to move with the mother to Montreal at the end of the child’s school term. Justice Sherr finds that the advantages of the mother and child moving to Montreal clearly outweigh the disadvantage of any loss of contact with the father. Further, Justice Sherr boldly asserts in paragraph 31 that the mother will likely be a happier and better-functioning parent in Montreal. This will benefit the child.

A careful reading of Justice Sherr’s decision reveals that at the forefront of mobility issues is the child’s best interest. Justice Sherr does not make the assertion that a happy parent equals a happy child, but rather implies that it is a side effect of his decision. However, not all cases are alike and although both the mother and child in this case will be better off with the relocation, conflicting jurisprudence shows that this delicate issue is one that is decided on a case by case basis.

[1]Best interests of child

(2)  The court shall consider all the child’s needs and circumstances, including,
(a) the love, affection and emotional ties between the child and,
(i) each person entitled to or claiming custody of or access to the child,
(ii) other members of the child’s family who reside with the child, and
(iii) persons involved in the child’s care and upbringing;
(b) the child’s views and preferences, if they can reasonably be ascertained;
(c) the length of time the child has lived in a stable home environment;
(d) the ability and willingness of each person applying for custody of the child to provide the child with guidance and education, the necessaries of life and any special needs of the child;
(e) the plan proposed by each person applying for custody of or access to the child for the child’s care and upbringing;
(f) the permanence and stability of the family unit with which it is proposed that the child will live;
(g) the ability of each person applying for custody of or access to the child to act as a parent; and
(h) the relationship by blood or through an adoption order between the child and each person who is a party to the application. 2006, c. 1, s. 3 (1); 2009, c. 11, s. 10.

 

Past conduct

(3)  A person’s past conduct shall be considered only,
(a) in accordance with subsection (4); or
(b) if the court is satisfied that the conduct is otherwise relevant to the person’s ability to act as a parent. 2006, c. 1, s. 3 (1).

 

Violence and abuse

(4)  In assessing a person’s ability to act as a parent, the court shall consider whether the person has at any time committed violence or abuse against,
(a) his or her spouse;
(b) a parent of the child to whom the application relates;
(c) a member of the person’s household; or
(d) any child. 2006, c. 1, s. 3 (1).

 

In addition to the Act, Justice Sherr mentions the importance of considering the leading authority on mobility cases, Gordon v. Goertz,1996 CanLII 191 (SCC), [1996] 2 S.C.R. 27 (S.C.C.). The law is summarized in paragraphs 49 and 50 of that case.

This notion was heavily doubted in Berry v. Berry, 7 R.F.L. (7th) 1 (Ont. C.A.) and Bilopavlovic v. Bilopavlovic, 2008 CarswellOnt 2649 (Ont. C.A.).