When spouses or common law partners separate, The Family Property Act applies in Saskatchewan such that the fair market value of the family property will generally be equally divisible between the two parties, subject to certain exceptions. However, it can be difficult to determine whether certain items of property will be considered family property for the purpose of property division.  For example, family trusts are commonly established for estate planning; whether the assets of the family trust will be considered family property will depend on the circumstances. In Grosse v Grosse, 2015 SKCA 68 [Grosse], the Saskatchewan Court of Appeal examined whether a spouse’s interest in a family trust would be considered family property for the purpose of property division. The parties were married for 28 years and had two children. For estate planning and income tax purposes, the husband set up a family trust, of which the children and the husband were the beneficiaries.  The husband was the sole trustee and was granted broad discretionary powers to determine if, when, and how much the beneficiaries were paid from the trust. The trial judge characterized the husband’s interest in the trust as a contingent beneficial interest, and held that this interest constituted family property.  Because it was not certain that the husband would distribute any of the trust assets to himself, the judge ordered that if and when the husband took money or value from the trust, he would be obligated to pay his spouse 50% of the amount withdrawn. The Saskatchewan Court of Appeal overturned the trial judge’s decision and held that the trust assets were family property for the purpose of property division. Madam Justice Ryan-Froslie, writing for the Court, explained that under these circumstances the court is allowed to “pierce the veil” of the trust to ascertain what degree of control the spouse exercises over the property. She explained at paragraph 28:

If a spouse retains the power to consume, invoke or dispose of that property, then the property is deemed, by virtue of the definition provisions of the Act, to be “family property” and its fair market value is prima facie subject to an equal division between spouses.

Due to the husband’s sole and unfettered control over the trust assets, Madam Justice Ryan-Froslie determined that the husband’s interest in the trust equated to the value of the trust’s assets, and the fair market value of the trust assets were therefore divisible. She explained that the value of the assets was readily determinable, and therefore an “if and when” order was not appropriate. The children only had a contingent beneficial interest in the trust, and therefore did not have a right to demand any of the trust’s income or assets at that time. In Grosse, the Court of Appeal provided useful direction in determining whether the assets in a family trust will be considered family property for the purposes of property division upon marital breakdown. These matters are fact-specific, however, and a lawyer should be consulted to determine the legal implications of establishing a family trust.

About the author: Katherine is an associate in the Regina office and has an interest in all areas of litigation, with particular interest in Family Law and Estates Litigation

About McKercher LLP: McKercher LLP is one of Saskatchewan’s oldest, largest law firms with offices in Saskatoon and Regina. Our deep roots and client-first philosophy have made us a top ranked firm by Canadian Lawyer magazine (2011, 2013). Expertise, experience and capacity provide innovative solutions for our clients’ diverse legal issues and complex business transactions. This post is for information purposes only and should not be taken as legal opinions on any specific facts or circumstances.  Counsel should be consulted concerning your own situation and any specific legal questions you may have.