Spouses sometimes put the matrimonial home in the name of one or other of the spouses to try and insulate the asset from creditors. There is a line of cases in bankruptcy law which suggests that this move is open to challenge[1]. Creditors of the husband can go after the matrimonial home even when it has been in the wife’s name for some time.
On a related note, it is generally fundamental breach of the mortgage agreement, assuming that both parties signed the mortgage, to change the names on title without the bank’s consent and they are highly unlikely to release one of their guarantors of the mortgage.
Nonetheless the tactic has been used often enough for a significant body of case law to have developed around the question of how the matrimonial home is divided up upon separation.
Upon separation, the titled spouse often thinks about freezing out the non-title-holder from any part in the matrimonial home or its equalization value or the post-separation increase in value.
This tactic was attempted by the wife in the case of Korman[2] for example, where the husband transferred titled to the wife to avoid creditors early in the marriage, upon separation the wife decides to employ the husband’s avoidance tactic against him and she tries to keep the post-separation increase in value in the basis that she is the titleholder.
Now the husband realized, too late, that his creditor-avoidance tactic implicitly implied the intention to avoid creditors on the basis that the house-transfer was a ‘gift to the wife’. It didn’t matter how many times both husband and wife told the court it was ‘for purpose of avoiding creditors’, the judge insisted that the original intention had to have been ‘gift’.
Fortunately for the husband, the court of appeal saved the husband from the unintended consequences of trying to avoid creditors all those years earlier. The court of appeal did not agree that intending to evade creditors necessarily implied the husband was ‘gifting’ the property to the wife[3]. More importantly, if any of the lawyers or the judge had considered actually reading the case law, there was a line of cases which specifically stated that avoiding creditors did not necessarily imply gift to the wife[4].
The husband in this case benefited from a ‘presumption of resulting trust’[5]. What this means, in ordinary language, is that the fact that the asset is in the wife’s name doesn’t matter. The husband can claim equal ownership and the wife must proof that it is not jointly owned. The fact that her name may be the only name on title is not the central fact. The actual original intention of the transferor is what is truly important.
So what’s important about this case for ordinary people separating?
Firstly, the case settles the issue of whether the separation date is important. It’s not relevant[6]. Both ‘owners’ continue to enjoy the benefits of any appreciation in value regardless of one having moved out and regardless of title.
Secondly, it clarifies how the asset is to be listed in the form 13.1 financial statement. Title issues are determined before equalization payments are determined. This means that half the value of the home is to be placed in both husband’s and wife’s form 13.1. Only after that is there an equalization payment to be considered. In other words, the house is not factored into the equalization process[7] and both parties essentially split the net house value.
Thirdly, for the spouse who is thinking about the tactical advantage of trying to grab the totality of the matrimonial home, the evidence required in a trial includes a clear proof that the transferor wanted to give the property to you as a ‘gift’. It doesn’t’ matter what the transferee’s intention was[8]. The spouse grabbing the asset must prove the gift.
[1] See for example, Robinson (Re); [1994] O.J. No. 136; 24 C.B.R. (3d) 55; see also: Grefford v. Fielding (2004) O.J. No.1210.
[2] Korman v. Korman, 2015 ONCA 578
[3] para 38.
[4] para 38.
[5] this presumption of resulting trust is specifically stated in the Family Law Act, RSO 1990, c F.3 —s.14
[6] for purposes of valuing the matrimonial home.
[7] because it is an equal amount in both net property statements therefore it doesn’t affect the outcome of who pays who how much.
[8] See Cromwell J. in Kerr v Baranow 2011 SCC 10 at para 24.
