Accounting, Equalization, and Protection
Each spouse or common-law partner is entitled to an accounting and equalization of family property and may apply to court to enforce this right, if necessary.
What is a family asset?
Under The Family Property Act, property that is used for family purposes, such as shelter, transportation or recreation, is a family asset.
Some examples are:
- the family home
- household furniture
- the family car
- a summer cottage
- money in savings, chequing or current accounts (where this money is used for family purposes)
- rights under life or accident and sickness policies, or annuity policies
- registered retirement savings plans (RRSPs)
Family property that is not a family asset is a commercial asset and may include:
- an interest in a business, such as a drugstore, construction company, medical or law practice
- a life insurance policy or accident and sickness insurance policy, taken out solely to provide compensation for loss to a business undertaking due to the death or illness of the insured person
The special nature of a farm may make it both a family and commercial asset.
A farmhouse, and that part of the farmland necessary for the enjoyment of the farmhouse, are considered the family home and therefore a family asset. The rest of the farm property may be a commercial asset.
What is accounting and equalization of assets?
An accounting involves the preparation of a complete list of assets and debts by each spouse or common-law partner. The list must show the value of each asset and the amount of each debt on the date of separation. If a spouse or partner will not provide such a list voluntarily, the court may order it.
Who determines the total value and equal share?
The court will determine the total value of the assets each spouse or common-law partner must account for. Debts or liabilities will be deducted from the total inventory of assets, unless the debts relate to exempt assets or would result in a negative value. It will then determine how much the spouse or common-law partner with more should pay to the other (an equalization payment), so that each may have an equal share of the assets. The court does not divide the assets themselves. However, it can order that ownership of an asset be transferred from one spouse or partner to the other to satisfy an equalization payment.
In some cases, the court may decide that the assets should be shared unequally. This depends partly on whether the asset is a family asset or a commercial asset. The court may divide family assets unequally, only if it is satisfied an equal division would be grossly unfair because of extraordinary circumstances. Judges have slightly more discretion to divide commercial assets unequally, but must be satisfied that it would be clearly unfair to share them equally.
What are the legal deadlines for filing an application for an accounting and equalization?
Where a court has granted a divorce and the issue of family property has not been dealt with, either ex-spouse may apply to the court for an accounting and equalization of assets. This application must be made within 60 days after the divorce takes effect. For common-law partners who have registered their relationship with the Vital Statistics Agency, either partner may apply to the court for an accounting and equalization of assets, but the application must be made within 60 days after registering the end of the relationship with the Vital Statistics Agency. For common-law partners who have not registered their relationship, the application must be made within three years from the date the common-law partners separated.
Does behaviour impact how assets are shared?
When deciding whether the assets should be shared unequally, a judge cannot consider the conduct or actions of the spouses or common-law partners, unless that conduct amounts to dissipation.
Dissipation is conduct that seriously threatens the financial security of the family. For example, if one spouse or common-law partner has given an excessive gift to another person, the court will take the value of this gift into account to reduce that person’s share in the family property. However, this can be done only if the other spouse or common-law partner has applied for a division of family property within two years of discovering that this gift was made. An unequal division of family or commercial assets is very rare.
How is sharing of assets impacted by bankruptcy?
Financial problems often accompany a breakdown of family relationships. If a spouse or common-law partner is unable to pay their debts, they may consider making an assignment into bankruptcy. This involves a trustee in bankruptcy taking possession of the bankrupt‘s property and distributing the proceeds received from that property among the bankrupt‘s accepted creditors. Some property is exempt from distribution.
A bankruptcy can have a serious impact on the sharing of property between spouses or common-law partners. According to a Supreme Court of Canada case decided in July 2011, a spouse or common-law partner who receives a discharge from bankruptcy is released from the other spouse or partner‘s claim for an equalization of family property. An equalization claim is a debt like any other debt, and a bankrupt spouse or common-law partner is released from it upon being discharged from bankruptcy.
Can property be protected before it is divided?
A spouse or common-law partner who has applied to the court for a division of family property, may also ask for an order to preserve property. This order prevents the other spouse from destroying, irresponsibly selling or giving away, or removing property from Manitoba before the court has dealt with the family property.