Trusts Under the New
Family Law Act
The Relevant Sections of the Family Law
Act and Their Effect on Trust Property
Fiona M. Beveridge
Family Property
84 (1) Subject to section 85 [excluded property],
family property is all real property and personal
property as follows:
(a) on the date the spouses separate,
property
(i) that is owned by at least one
spouse, or
(ii) in which at least one spouse
has a beneficial interest
Family Property
• S. 84 captures trust property itself as
opposed to the beneficial interest
• Whether a spouse’s beneficial interest is
property will depend on nature and terms
of the trust
• Vested or contingent interest generally
property
• Discretionary interest not generally
property
Excluded property
85 (1) The following is excluded from family property:
(e) property referred to in any of paragraphs
(a) to (d) that is held in trust for the benefit of
a spouse;
(f) property held in a discretionary trust
(i) to which the spouse did not contribute,
(ii) of which the spouse is a beneficiary,
and
(iii) that is settled by a person other than
the spouse;
Excluded property
• S. 85 excludes broad categories of trust
property derived from pre-relationship
property, gifts, inheritances, personal
injury awards and insurance policy
proceeds
• S.85 also excludes property held in certain
discretionary trusts
Control Over the Trust Property
84(3) Despite subsection (1) of this section and subject
to section 85 (1) (e), family property includes that part
of trust property contributed by a spouse to a trust in
which
(a) the spouse is a beneficiary, and has a
vested interest in that part of the trust property that
is not subject to divestment,
(b) the spouse has a power to transfer to himself
or herself that part of the trust property, or
(c) the spouse has a power to terminate the trust
and, on termination, that part of the trust property
reverts to the spouse.
Control Over the Trust Property
• S. 84(3) refers to the control a spouse may
have over trust property
• It appears to include in the definition of
family property trust property where a
spouse may not be a beneficiary but
contributed property to the trust and
retains control over the property
Valuation of the Interest
84 (2) Without limiting subsection (1), family property
includes the following:
(g) the amount by which the value of excluded
property has increased since the later of the
date
(i) the relationship between the spouses
began, or
(ii) the excluded property was acquired.
Valuation of the Interest
• The increase in the value of excluded
assets is included in family property
• This is where the problems arise:
– The growth in the value of the property must
be determined
– What do you do where there are beneficiaries
other than the spouse?
Valuation of the Interest
• The section includes the growth of
excluded trust property rather than the
growth of a spouse’s interest in the trust
property.
• It effectively expropriates the interests of
any third party beneficiaries in favour of
the non-beneficiary spouse
• There are proposals to amend this section
Valuation of the Interest
• If the legislation is amended to take into
account the spouse’s interest, there is still
a valuation problem
• How much is the spouse’s interest?
• This is a particular problem where the
trustee can exercise discretion in favour of
one beneficiary over the others
Where to Go From Here?
• Currently, the legislation has left
uncertainty
• It appears the legislation will have to be
amended to deal with the uncertainty
• There is still concern that it will not
eliminate the valuation concerns that
existed under the FRA