Bennet Waugh Corne Lawyers - Lawyer - Family Law - Real Estate Law - Law Firm - Winnipeg - Manitoba

Monday, August 12, 2013

Pensions - What happens to my plans for retirement?

Week Four:  Pensions

by Kimberly Soul and Alison Bennet

Pensions are an important asset, not to be overlooked upon separation. Like all other assets that accumlate while in the relationship, these too must be shared and/or divided.  The rule of thumb is that one half of the increase in value of a party’s pension during the relationship is shareable with that party’s spouse or common law partner; there are some differences between plans which impact how they are divided. 

The first step, as with any other asset, is to figure out its value.  Often, the Pension Plan Administrator will complete this calculation at no cost.  It is important that prior to contacting your Pension Benefits Administrator that the parties agree on the date of cohabitation and date of separation as these dates will be used to calculate the amount of the entitlement. Often Pension Benefits Administrators will not redo the calculation if the date of cohabitation and date of separation change. The calculations are complex actuarial calculations and typically we have found that clients are only able to obtain one calculation.  In some cases, it is necessary to obtain the services of an actuary to calculate the value of the asset. 

Federally regulated employment pensions are deemed property and shareable pursuant to The Pension Benefits Standards Act.  The value of the asset is then included in the family property accounting along with all other assets.  This legislation sets out that the division of the pension can be done in any amount. For example: if one party’s entitlement is $10,000.00 but pursuant to the other property accounting the party is only receiving $4,000.00, the parties are permitted to conduct a transfer of $4,000.00. It is common practice to include the value of a federally regulated pension in the parties’ Family Property Act accounting. In addition, with federally regulated pensions a party waiving their interest to their entitlement does not need to know the exact amount of their entitlement to effectively and legally waive their interest. This is not the case with provincially regulated pensions.  It is of course recommended that you never waive your interest to any asset without knowing what it is worth.  Once the accounting of assets is completed, and included as part of a separation agreement or court order, it normally cannot be changed.  Because federally regulated pensions do not have to be divided equally, as part of the negotiation process the parties may balance part of the value of the pension against other assets.

The Pension Benefits Division Act applies to certain federally regulated pensions such as pension plans provided by Public Service Superannuation Act, Canadian Forces Superannuation Act, Royal Canadian Mounted Police Superannuation Act to name a few. The transfer of funds to one party must be in an amount equal to their entitlement which is similar to The Pension Benefits Act.

The Pension Benefits Act applies to provincially regulated pensions in Manitoba. A party waiving their entitlement to a pension governed by The Pension Benefits Act must sign a Pension Benefits Spousal/Common Law Agreement and obtain Independent Legal Advice. In addition, the party waiving their interest must know the exact amount of their entitlement. The party opting out of receiving their entitlement to the other party’s pension must be provided with a statement showing their entitlement, called a commuted value statement. A commuted value statement can be requested from a Pension Benefits administrator. The transfer of funds of an entitlement to a provincially regulated pension can only be done if the full entitlement is being transferred. For example: if one party’s entitlement is $10,000.00 but the parties have negotiated a resolution and they’ve agreed that only $4,000.00 is to be transferred – this transfer would not be able to occur. The Pension Benefits Act prohibits the transfer of any amount except the exact amount of the entitlement as set out in the Commuted Value Statement (plus the interest accrued).

The Pension Benefits Standards Act, The Pension Benefits Act and The Pension Benefits Division Act all apply to married persons and common law relationships but vary in their definition of a common law relationship.

Pursuant to The Pension Benefits Division Act a common-law partner “means a person who establishes that the person is cohabiting with a member of a pension plan in a relationship of a conjugal nature, having so cohabited for a period of at least one year”.

Pursuant to the Pension Benefits Act of Manitoba, a common law partner is defined as follows:

"common-law partner" of a member or former member means

(a) a person who, with the member or former member, registered a common-law relationship under section 13.1 of The Vital Statistics Act, or

(b) a person who, not being married to the member or former member, cohabited with him or her in a conjugal relationship

(i) for a period of at least three years, if either of them is married, or

(ii) for a period of at least one year, if neither of them is married;

 

As a result of this definition if neither party is married but only cohabitated for one year, one half of the increase in value of the pension is shareable. If either person is married the pension is not shareable until they have cohabited for three years.

Pursuant to The Pension Benefits Standards Act, a common-law partner is “in relation to an individual, a person who is cohabiting with the individual in a conjugal relationship, having so cohabited for a period of at least one year”.

Canada Pension Plan credits are handled a bit differently. These are shareable between married persons and persons that have cohabitated together in a conjugal relationship for at least one year. Currently in Manitoba, parties are not permitted to enter into an agreement not to divide their pension credits between them. Canada Pension Plan will not abide by an agreement between parties not to share in each other’s pension credits unless the agreement was signed before June 4, 1986 and specifically sets out that Canada Pension Plan credits are not to be split. 

 

Posted by Alison Bennet at 1:23 PM 0 Comments

Monday, July 22, 2013

But I Bought this Before I Even Knew You: Assets Acquired Before the Relationship

Week Three: Previously Acquired Property

by Kimberly D. A. Soul and Alison L. Bennet

All property and the increase or decrease in value of this property, acquired in contemplation of a relationship or during a relationship are shareable. The value to be shared is the value as at the date of separation.

Only the increase or decrease in value during the relationship of pre acquired property is shareable. For example, prior to the commencement of a relationship one party has an RRSP worth $10,000.00. At the end of the relationship, on the date of separation, the party’s RRSP is worth $25,000.00. The increase in value, $15,000.00, is shareable between the parties in the overall accounting.

Often one party owns real estate prior to commencing a relationship. If the real estate remains in the sole name of that person only the increase in value of the property is shareable. For example Party A owns a home in his/her own name prior to commencing a relationship with Party B. Party B moves into the home and lives with Party A for 10 years. Party B is entitled to one half of the increase in the property value during those 10 years. In addition, Party B has Homestead Rights in the property. See The Homesteads Act of Manitoba.

 

Posted by Alison Bennet at 12:00 AM 1 Comments

Monday, July 08, 2013

Jointly owned property

Week Two: Jointly held property (real and personal)

By Kimberly D. A. Soul

Jointly held assets and debts are to be divided equally. Because they are owned jointly, these assets are not necessarily valued at date of separation; rather the value on the date of sale or transfer is relevant. A common example is a jointly owned house (real property). Unlike other assets it is possible to apply to the court to partition or sell real property.

If the house has a value of $200,000.00 at date of sale but is not sold until a year later, by which time it increased in value to $250,000.00, it is the $250,000.00 that is equally shared. One party will often keep an asset and then compensate the other for one half of the gain or keep a debt and be compensated for one half of the loss. Assets and debts can be transferred from one party to the other or put into the sole name of one party to finalize the division.  

If the parties cannot agree on how to deal with the joint asset, the court can order sale of the property.  When it comes to the family home, certain factors may resulting in postponing the sale.

Personal property (for example: household contents) are typically jointly owned however as a matter of practice lawyers often include these items in a Family Property Act accounting.

Posted by Alison Bennet at 12:00 AM 0 Comments

Tuesday, July 02, 2013

How is Property Valued and Divided?

Week One: How is Property Valued and is it Divided?

by Kimberly D. A. Soul, and Alison L. Bennet

After separation it is helpful if clients make a list of all the assets and debts in their name as well as in their partner’s name. Oftentimes parties do not know the complete financial picture of their partner. Each party is required to disclose to the other all property and debts in their name. Each party will ultimately complete and sign a Form 70D which sets out their respective assets and debts. If a party does not voluntarily disclose their assets and debts they will be ordered to do so by the Court.

The value of property is generally determined as of the date of separation (the current market value as of that date). To determine the value of an item it can be appraised by a professional appraiser. Oftentimes parties will agree as to the value of minor items to avoid appraisal costs. Bank account statements, credit card statements, investment statements etc will prove the value of the property at the date of separation. Vehicle values can be determined using a Black Book Value or consulting with a dealership. Prior to meeting with your lawyer it is best to have as many of these documents compiled as possible.

Once the value of assets and debts are determined a Family Property Act Accounting (for non joint assets or debts) can be completed. The total of Party A’s assets less their debts provides a net position for Party A. The same is done for Party B. The net positions are then equalized. Each party should end up with one half of the total value. For example:

                Party A has $10,000 of assets and $2,000 of debts for a net position of $8,000

                Party B has $15,000 of assets and $5,000 of debts for a net position of $10,000

Total: $18,000/2 = $9,000 to each party. Party B would thus owe Party A $1,000 to equalize their positions.  The payment would then equalize the value of the 2 parties' date of separation net worths, but each party keeps their own assets and debts.

The court, or the parties by agreement, then determine how the payment will be satisfied, and this can include transferring of assets.

This is the general scheme.  Like many things, the devil is often in the detail; when it comes to family property, the issue is usually what value should be attributed to the items, after consideration of tax and other issues.  Another issue is whether the value of the asset should be included in the accounting at all for reasons including it was preacquired, acquired by way of gift or inheritance, or, in some cases insurance benefits.  More about some of these issues will be discussed in later posts. 

 

Posted by Alison Bennet at 1:13 PM 0 Comments

Thursday, June 13, 2013

Family Property Division

Family Property Division

By Kimberly D.A. Soul

When a couple, married or common law, decides to separate, the division of family property is always a pressing issue. At Bennet Waugh Corne we strive to ensure that our clients are well educated in the areas affecting their matter. Over the next several weeks we will post a brief overview of  different  property  issues and how it is to be dealt with upon separation pursuant to the relevant legislation. 

The Family Property Act applies to residents of Manitoba. If one of the parties does not live in Manitoba the Family Property Act will apply if Manitoba was the last place of residence of the parties. Family Property subject to the Family Property Act  is property that has been acquired during a relationship or in contemplation thereof. Generally, the value of all property held by either party on the date of separation is equally shareable with the other party. Property includes things such as vehicles, investments, jewelry, real estate, RRSP’s, pensions, bank accounts, household contents. Etc.

Jointly held assets and debts are not dealt with in the same way as assets and debts held in each parties own name. Jointly held assets and debts are subject to The Law of Property Act of Manitoba for real property. They do not get added into the Family Property Act accounting. Jointly held assets and debts are already owned and owed equally between the parties.

The date of separation is important as all assets and debts, except joint, are valued as of the date of separation. Oftentimes parties disagree as to the date of separation. It is important to meet with a lawyer to canvass the law in this area.

Unless otherwise specified the explanations provided apply to married couples as well as common law couples who have either been living together for 3 years (and permanently separated after June 30, 2004) or have registered their relationship with The Vital Statistics Agency.  Note that common law couples must make an application for an accounting and equalization of assets within 3 years of the date of separation. There is no such timeline for married persons unless a divorce has been granted by the Court wherein the parties have 60 days to apply for an accounting and equalization of property if same has not yet been dealt with.

 

Posted by Alison Bennet at 12:00 AM 0 Comments

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