The Rural Voice, 1994-10, Page 16Agrilaw
Dividing inherited land on marriage break-up
Farmers who own their land often
have acquired ownership by way of an
inheritance or as a gift from a parent or
relative. Each province has legislation
which defines the property rights of
spouses on separation. In Ontario, the
Family Law Act has special
provisions with regard to property
acquired by gift or inheritance when
spouses separate. The topic, therefore,
of inheritances and gifts on separation
is of some significance to the farming
community.
Division of property under the
Family Law Act is by way of "equali-
zation" between the spouses and not
by an equal sharing or division, as is
often thought. What this means is that
the value of all property owned by
spouses on the date of separation must
be valued, less any debts or
encumbrances, and the resulting value
equalized as between the parties. For
illustration purposes, if the husband on
the day of separation has property
valued at $100,000 and the wife has
property valued at $50,000, the
husband will have to make a payment
to the wife of $25,000 to equalize their
properties. An important feature of
this regime is that property (such as
RRSPs or stocks, etc.) held legally in
one spouse's name does not have to be
divided with the
other spouse, but
the value of that
property is
"shared" on an
equal basis by
the equalization
process.
The Family
Law Act has as
its guiding
principle with
regard to sharing
of property on
separation that whatever assets have
been generated during the marriage are
shareable on an equal basis. It defines
marriage as an equal partnership, and
no enquiry will be made into who
generated the asset during the marriage
except where a marriage contract
Family
Law Act
makes
special
provisions
provides otherwise. Because of this
principle, assets that are acquired
during the marriage for a reason that is
unrelated to the marriage, namely by
inheritance or gift or through
settlement of a personal injury claim,
are assets that belong exclusively to
the spouse receiving them and are not
shareable on separation, but are
"excluded" properties from equaliza-
tion. The further application of this
principle of partnership is that, if a
spouse brings assets into the marriage,
then that spouse will be given credit
for the value of those assets by
deduction of that value as of the date
of marriage from the spouse's net
family property on separation.
How does this apply in the context
of farms obtained by inheritance or
gift? If the farm property has been ob-
tained prior to marriage either by gift
or inheritance, the value of that proper-
ty as of the date of marriage will be
deducted from the net family property
of that spouse. For example, suppos-
ing the husband has, as of the date of
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