Spouses can make an agreement to divide all or some of their family property in whatever way they think is best. If the agreement meets the requirements of an interspousal contract under The Family Property Act, a court will not generally change the way the property is divided. If the agreement is not an interspousal contract courts can still consider it.
The Family Property Act sets
out certain requirements for an agreement to be considered an
interspousal contract. Interspousal contracts are presumed to be
enforceable. The Act states that an interspousal contract must be in
writing and must be signed by each spouse in front of a witness. Each
spouse must also get independent advice from their own lawyer before
signing the contract. Each spouse must then acknowledge in writing,
apart from the other spouse, that they have received independent legal
advice and that they understand the contract and its effect on their
Once a contract that meets these specifications is made, courts will
not interfere with property dealt with under the contract unless it was
grossly unfair and one-sided at the time it was made.
Spouses can make a family property agreement that does not meet the requirements for an interspousal contract. The Family Property Act states that courts can consider these types of agreements and give them whatever weight the court considers reasonable.
In these cases the court first considers if a valid agreement has
been made according to the general rules of contract law. Basic things
like whether the parties actually came to an agreement would be
considered at this stage.
If there is a valid agreement, the court would then go on to look at
whether the circumstances under which it was made were unfair to one of
the parties. The party who is saying it was unfair would need to show
that there was undue pressure, exploitation of a power imbalance, other
vulnerability or something that prevented the party from understanding
some essential part of the agreement. The fact that the parties did not
have legal advice or that there was no disclosure are not alone enough
to show that the agreement was reached in an unfair way.
If the agreement is not discounted because of unfairness in the
process of creating the agreement, the court would then look at the
division the parties agreed to. The court would consider if the division
is within the range of fair and equitable possibilities contemplated
under The Family Property Act. The fact that the agreement does not divide everything equally does not alone mean that it should not be considered.
To properly deal with some or all family property by agreement, full disclosure by both spouses is generally needed unless the parties are already aware of any assets that may be family property. It is important for both spouses to have a complete picture of the family property and its value, including:
- all real property
- general household goods and vehicles
- bank accounts and savings
- pension and retirement savings plans
- life and disability insurance
- business interests
- accounts receivable
- other property
While debts are not considered family property under The Family Property Act, they nonetheless form part of the big picture and must be factored into a property agreement. The Property Statement that must be filed with court applications involving family property can also act as a kind of worksheet for spouses who are considering making an agreement. Once spouses have a clear picture of all their debts and assets they can decide how to divide them.
Agreements should cover things such as…
- any assets that are in the name of only one spouse that will stay in the name of the spouse who currently has title
- any assets that are in the name of only one spouse that will be transferred to the other spouse
- any joint assets that will be transferred to the name of one spouse only
- how any transfers will be done, i.e. which spouse is responsible for the paper work, legal expenses and other costs, etc.
- how assets that are not in the name of either spouse e.g. furniture, art work, etc. will be divided
- any assets that will be sold, as well as the process for the sale and how the proceeds will be divided/used to pay debts
- any cash payments one spouse will make to the other spouse to equalize the value each will receive, as well as when and how these payments will be made
- any debts that will be paid out and how this will be done, i.e. who will be responsible for doing this, where the money will come from and when this will be done
- which spouse is responsible, as between the spouses, for which remaining debts and what will happen if the lender requires the other spouse to pay the debt, i.e. the spouse who covered the debt will be reimbursed
- spouses are both free to acquire property in the future without any claim from the other
- assets that are not disclosed at the time of the agreement are not covered by the agreement
This is not a complete list of things to include in an agreement. You will need to have a lawyer review your agreement.
Even if you can’t reach an agreement on the division of property you may be able to reach an agreement on the value of certain property with or without the assistance of professionals such as appraisers and accountants. This could simplify a court application for a division of property.