Divorce is stressful as it is, but what happens to the condo?
June is traditionally marriage time. In 1989, a law was adopted introducing the concept of family patrimony. It changed the way we look at property belonging to married couples.
This law is of public order, which means no one has the option of deciding they do not want it to apply to him or her. Upon marriage, a couple cannot renounce its provisions or ignore the effect it will have upon certain of their assets. Also, it supersedes the contents of a marriage contract.
A family patrimony is created by marriage or civil union. As long as a couple is domiciled in the province of Quebec, the provisions of the family patrimony law will apply to them and will have an effect upon division of assets at the time of separation, divorce or death regardless of where they may have lived at the time of the marriage.
The idea behind the creation of family patrimony was to promote economic equality between spouses by ensuring that certain assets belonging to and/or used by a couple during the marriage were equitably divided upon its dissolution.
The assets included in family patrimony are the family residences, the furniture and furnishings contained in them, motor vehicles used for family travel, pension plans and some retirement plans.
It is at the end or breakup of the marriage or civil union that the value of the family patrimony is established, according to specific rules set out in the Civil Code of Quebec. It does not matter who has a right of ownership in a particular asset. If it forms part of the family patrimony, it is included in the evaluation.
When we marry, certain property we possess will automatically become part of the family patrimony.
It may not be a first marriage and a person already owns assets at the time of their remarriage; when that marriage ends, either through divorce or death, the family patrimony ceases to exist and its net value must be calculated and divided.
People are often surprised to learn that their spouse has a financial interest in what they thought was completely theirs. In many cases, a substantial pension or RRSP has been accumulated by one of the spouses during the marriage and it can be shocking to learn that it must be shared with the other spouse.
There may be exceptions in cases of a marriage of very short duration or in cases in which one of the spouses has dissipated assets, but the general rule is one of equal division between the parties.
A specific problem occurs when a senior remarries and either already owns a home that becomes the family residence, or has inherited money from a deceased spouse and uses those funds to purchase a residence or such family patrimony assets as furniture or a car during the new marriage. The question arises as to what happens when the second marriage is dissolved by death or divorce.
A couple can settle the matter between themselves and agree on how to divide their assets. They may agree to sell their home, take back whatever amount they contributed and split the balance. Or they may agree that the original owner of the house keeps it and half the increase in its value during the marriage is divided between the parties.
However, when the parties cannot agree on the evaluation or how to divide the assets, the calculation of who gets what according to law can be complex.
The law provides a mathematical formula for calculating the value. Let’s assume you own a condo and remarry but continue to live in your condo as a family.
That condo will be included in the family patrimony. Upon dissolution of the marriage by death or divorce, assuming you are unable to mediate an agreement with your spouse or his estate, you will have to establish two things: the net value (market value less mortgage) of your condo at the time of the marriage and the increase in the market value of the condo between the time of the marriage to the time of its dissolution.
Before the value of the condo is divided, you will be able to take back an amount equal to the net value of the condo at the time of the marriage plus a portion of the increase in value corresponding to the ratio between the net value and market value of the condo at the time of the marriage.
What remains after you have taken this amount back will be equally divided.
Where inherited money has been used to purchase a family residence, those funds can also be reclaimed prior to dividing the value.
If family patrimony assets are bought and sold during the marriage using inherited funds, the calculation of how to divide the properties upon dissolution of the marriage becomes even more complex.
Calculations are also needed when improvements are made to a property using inherited funds or where such funds are used for the purchase of or invested in other family patrimony assets.
The calculations can be complicated and depend on the individual situation. There are no easy, immediate answers.