How to Preserve Your Spousal Rights Before Separation, Divorce or Death

BY: VALERIE DYE

For the most part, discussions about property division and equalization arise in relation to separation, divorce or death.  The Family Law Act outlines the equalization process which allows the spouse with the higher net family property value to pay half of the difference to the other spouse.

Equalization may also take place after one spouse dies in that the surviving spouse may elect to refuse any gift left to him or her under a will and to opt instead for division of property, through the process of equalization.  Naturally, this decision will be made only if it is determined that the surviving spouse stands to gain more through the process of equalization than under the will.

One scenario that is much less common among married spouses is where the process of equalization is done even while parties are still together and intend to remain together.   This situation is provided for under section 5(3) of the Family Law Act which states as follows:

When spouses are cohabiting, if there is a serious danger that one spouse may improvidently deplete his or her net family property, the other spouse may on an application under section 7 have the difference between the net family properties divided as if the spouses were separated and there were no reasonable prospect that they would resume cohabitation.

The intention of this provision is to protect one spouse where it becomes apparent that the other spouse intends to take measures to deplete his or her assets, which will in turn affect the rights of the other spouse.

For instance, spouse A may have a greater value in assets than spouse B. However, spouse A may decide to transfer some of his or her assets to other family members or may simply squander the assets so that in the event of a subsequent divorce of death, spouse B will not benefit significantly from an equalization of net family assets.

The Court of Appeal of Ontario ruled on this issue in the case of Stone vs Stone in 2001. In that case, the husband knew that he was going to die very soon and to prevent his wife from benefiting from his assets he transferred most of it to the children he had from his previous marriage.

The court ruled that the wife could have brought an application for equalization and division of asset before the husband’s death even though they were not separated.  However, since the transfers were done without the wife’s knowledge the court made an order revoking the transfers and allowed the wife to proceed with the process of equalization.

It is important to note that, firstly, this process of equalization can be started even though the parties are not separated and though they continue to be married to each other, once it can be proved that one party is depleting his or her assets. Secondly, once the equalization process takes place the parties can no longer go through any further equalization process in relation to their marriage.

The benefit of this provision is that no spouse has to sit idly by while the other spouse intentionally or otherwise, depletes his or her assets.