Lecture 7 - Family Law / Marital Property

Divorce Framework

1. That property acquired during the relationships should be equally shared on separation.

2. Law looks at allowing a person’s legitimate interests. Goal is to accomodate those interests.

3. Cohabiting couples can also created legal obligations. Anything longer than 2-3 years of living together (common-law marriage).

   • Property can still be divided in common law similar to property in marriages.

Property

Everything that can be transferred. As it relates to agriculture, this includes shares (for corporations), land, inventory (crops and seeds), equipment, homes, etc.

This can be inclusive of anything in your name, or in the name of a corporation.

Property Value Increase

When two people get married, the things they already owned before the marriage usually stay theirs alone. But if those things go up in value during the marriage, that increase in value might be shared if the couple.

• This helps everyone understand what is considered individual property and what might be shared later.

• This does not include the family farm. No matter who owned it first, or even if it was a gift or inherited, the entire value of the home must be shared equally if the marriage ends.

The Homesteads Act of Manitoba

Gives protection to the family home. Applies to farmhouse as well as 320 acres of land. This is to protect the non-owning spouse from being left without a home, as family farms are often passed down through generations.

• The non-owning spouse must consent to the sale of the house.

• If the owner spouse or common-law partner dies, the non-owning spouse is entitled to continue living in the family home for the rest of his or her life, even if the owner’s will leaves the home to someone else.

Cohabitation Agreements

Can clarify the roles, expectations around the relationships and the home and farm.

Prenuptial Agreements

A way of presetting and negotiating a divorce settlement. These can help reduce the impact of divorce, and set out the expectations.

• Should indicate how assets are to be divided if a divorce were to occur.

Agreement (for family farm)

An agreement that acknowledges that the farm is to be passed on for the family or generations. This can be used to show the family’s intention of keeping the farm.

Ways to mitigate divorce risks

1. Ensure that everyone discloses all of their assets, liabilities existing prior to marriage, including copies of tax returns, balance sheets and deeds.

2. Protect legitimate interest and make sure the spouse is also looked after.

   • Unfair agreements can be set aside.

3. Separate lawyers should review the agreement. One cannot represent both if divorce was to occur.

4. If you don’t pay your partner for helping on the farm, the law might assume they were a true partner in the business, not just helping out casually.

   • That could mean they have a right to part of the property or profits, even if the farm is in your name only.

   • Compensation for work could weaken their claim.

5. Property gifted or inherited is usually excluded.

   • Gifted shares are not included.

6. Trusts

Trusts

Parents put a farm’s common shared (when incorporated) into a trust for their children. The child does not officially own the shares, so they do not have to give half to their spouses, even with divorce.

Bankruptcy

Works as a shield of assets as it is possible on separation for a spouse to avoid making an equalization payment to make things fair.

• But if one spouse files for bankruptcy before making that payment, they might not have to pay it anymore.

• They might keep assets that are protected from bankruptcy (like a farm or home), while the other spouse gets nothing.

• Imagine you separate from your spouse. They owe you money to make things fair (an equalization payment), but instead of paying, they declare bankruptcy. Because of this court ruling, they might:

  • Avoid paying you anything, and

  • Keep key assets like the family farm or house.

Unanimous Shareholder Agreements

A legal contract signed by all shareholders of a corporation (like a farm company). It lays out the rules for how the business will be managed and what happens if someone wants to leave or if major life events (like a divorce) occur.

• Helps protect the farm business from disruptions, such as if a shareholder gets divorced and their spouse might try to claim part of the farm.

• Can include terms that help prevent a spouse from gaining direct ownership or influence over the farm if a shareholder goes through a separation or divorce.

Mediators

Neutral third-parties who can help with issues, which can include support payments, division of property, custody and access to children.

• This could help parties reach agreement on assets value and division.

• Avoid unnecessary legal fees.

• Payment of Equalization Payment over time if more likely to occur in an agreement over a judgement.

• The family farm has a better chance of surviving with mediation participation, over third party judgement.

Equalization Payment

Money one spouse pays to the other to balance out the value of the assets they each get after separation.

• Part of the process of dividing family property fairly when a marriage or common-law relationship ends. It’s especially important when farm assets are involved, which can be high in value but not easily split (like land or equipment).

• Spouse A is a farmer and owns most of the farm property (land, machinery, livestock, etc.).

• Spouse B has little or no property in their name but contributed to the farm (e.g., unpaid labor, managing finances, childcare).

If the marriage ends, Manitoba law says both spouses have a right to an equal share of the value of family property, even if only one spouse legally owns it.

Gifts

Usually refers to land, equipment, or other farm assets that are transferred without payment from one person to another, often within a family. Gifts can play a major role in succession planning, ownership transfer, and tax implications on the farm.

• Example: A parent gives a quarter section of farmland to their child without asking for payment.

• This is common in family farms, especially when passing land or assets to the next generation.

• Help gradually transfer ownership to children or other family members.

• Younger farmers can start without taking on big loans.

• Can prevent the land from being sold outside the family.