II. Family Law Act: Inclusion of Pensions in Equalization

II. Family Law Act: Inclusion of Pensions in Equalization2017-03-03T18:30:50+00:00
Part I of the FLA provides, presumptively, that on marriage breakdown the spouses are entitled to share equally not only in the value of all assets acquired by either spouse during the marriage but also in any post-nuptial growth in the value of any assets brought into the marriage. To that end, Part I establishes a set of equalization rules based on the “net family property” of each spouse.

 

Subject to some qualification, the amount of a spouse’s net family property is calculated as follows: first the total value of all assets owned by him or her on the valuation date (generally, the date of separation)[2] is determined. From that figure two other sums are deducted, the total amount of all of the spouse’s debts and liabilities in existence on the valuation date and the difference between the marriage-date value of assets brought into the marriage and any debts and liabilities in existence at the marriage date.[3] (Where these deductions would otherwise result in a negative amount, the net family property is deemed to be zero.)[4] On marriage breakdown, the spouse with the lower-valued net family property is accorded a monetary entitlement equal to half of the difference between his or her net family property and that of the other spouse. (It should be noted that the FLA, unlike the family property legislation of some other provinces,[5] does not give the each spouse a joint interest in the various family assets; rather, ownership remains separate, while the spouses are put into a creditor-debtor relationship.)

 

Rights under a pension plan are considered to be property for purposes of the equalization regime. The term “property” is defined in subsection 4(1) of the FLA as including

…in the case of a spouse’s rights under a pension plan that have vested, the spouse’s interest in the plan including contributions made by other persons.[6]

 

The reference to vesting formed the basis for early decisions holding that rights that had not yet vested at the point of marriage breakdown were not included,[7] but “the weight of authority” now favours the view that unvested rights do constitute property.[8] Given, however, the possibility that this may not have been the Legislature’s intention,[9] a question arises as to whether the definition should be amended.

 

A more fundamental issue concerns the question of whether pensions should continue to be covered by the equalization regime. Some of those who favour using the “Deferred Settlement Method” (see section VI.C.3, below) argue that continuing to include pensions in the equalization regime will mean that the problems inherent in valuing such an asset will likewise continue, and that it would make more sense to divide pensions outside the equalization regime.

 

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