Net Family Property in Family Law - Part II
Introduction
Family Law is one of the most dynamic areas of legal practice, with the concept of Net Family Property (NFP) serving as a cornerstone, particularly in cases relating to divorce or separation. The intricacies of NFP are extensive and varied, making it a vital aspect for legal practitioners to understand thoroughly.
Definition of Net Family Property
The term 'Net Family Property' is specified in the Family Law Act, R.S.O. 1990, c. F.3, s. 4(1). It encapsulates the value of all the property a spouse owns on the valuation date, after accounting for the spouse’s debts and other liabilities.
However, it's crucial to note that NFP does not include the value of property, other than a matrimonial home, owned by the spouse on the date of the marriage. After deducting the spouse’s debts and liabilities specifically related to the acquisition or significant improvement of a matrimonial home, these assets are excluded from the NFP calculation.
This underlines the criticality of legal counsel understanding what exactly qualifies as property and what should be included in the NFP calculation. This knowledge can drastically affect the outcomes of divorce or separation proceedings.
What is Considered Property in NFP?
According to s. 4(1) of the Family Law Act, 'property' is a broad term. It is defined as any interest, present or future, vested or contingent, in real or personal property. This definition not only includes property over which a spouse has control but also property disposed of by a spouse but over which the spouse retains a power to revoke the disposition or consume. It also extends to a spouse’s rights under a pension plan.
Property, in the context of NFP, consists of all a spouse’s assets. These can range from tangible assets like cash, furniture, jewelry, artwork, and cars to intangible ones such as bank accounts, RRSPs, pensions, stocks, and debts. Other elements that fall under property are corporations, income tax refunds which have not yet been paid, and early retirement allowances and severances payments.
Exclusions from Property in NFP
While the definition of property under the Family Law Act is expansive, certain exclusions are explicitly stated. For instance, disability benefits were affirmed as excluded property for equalization purposes by the Ontario Court of Appeal in Lowe v. Lowe, [2006]. The reasoning behind this exclusion is that these benefits are more similar to an income stream and should, therefore, be considered for support purposes instead of property division.
However, retirement or employee benefit plans do not share the same exclusion. They are subject to equalization and are not considered excluded property, even when dealing with older clients. In these cases, it is important to consider that disability benefits might in effect become a retirement pension if the client does not have any intention to return to work.
Additionally, severance payments have a unique consideration. They are only recognized as property under the Family Law Act once they have crystallized. In other words, severance payments will only form part of the NFP if the spouse was legally entitled to them on or prior to the date of separation.
Conclusion
The concept of Net Family Property is a fundamental part of the Family Law landscape. It encompasses a diverse range of properties and comes with its own set of exclusions. The proper understanding and interpretation of these aspects can significantly impact the outcome of divorce or separation cases.
As Family Law continues to evolve, it's crucial for legal practitioners to stay updated with the latest interpretations and rulings concerning NFP. This not only allows them to provide more accurate counsel but also ensures that they can adequately protect their clients' interests during legal proceedings.
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