Under the Family Relations Act Property Owned by One Spouse for Business Is Not a Family Asset #19
By Gerry Neely
Under the Family Relations Act, property owned by only one spouse which is used primarily for business purposes, is not a family asset, unless the other spouse can establish that he or she made a direct or indirect contribution to the acquisition of the property by the other spouse, or to the operation of the business. An indirect contribution is defined to include savings through effective management of household or child rearing responsibilities by the spouse who holds no interest in the property. The disadvantage to the spouse who owns the property used primarily for business purposes, if it is held to be a family asset, is that the other spouse is entitled to an undivided one-half interest in the property. This entitlement is subject to a determination by the Court that having regard to any number of factors, including the duration of the marriage, an equal division would be unfair to one or the other of the spouses. The following brief reports illustrate the factors taken into consideration in giving a wife an interest in a business asset:
- a marriage of 15 years - a fisherman for part of the 15 years during which period his wife went fishing with him six or eight times - for the remainder of the marriage the husband built and operated a shingle mill where the wife was employed doing accounts and other work-the proceeds of sale of the fishboat were used to purchase the mill - the wife's contribution was held to be both indirect through effective household management and child-rearing responsibilities, as well as direct through her work for her husband. The mill was valued at $515,000.00 and she was given 20% of her husband's shares.
- common-law relationship-for one and one-half years followed by marriage in February 1978 and separation in February 1980 prior to the establishment of the relationship, the husband had purchased a 50% interest in a pub - the wife's earnings went into the household expenses, but she made little direct contribution to the business other than when she guaranteed a mortgage taken out to raise funds, in part, for the husband's business - the wife's direct contribution was the guarantee of the loan and her indirect contribution was her childrearing responsibilities. The wife was awarded $87,500.00, which was 10% of the husband's equity in the business.
- marriage of 14 years, during which the wife remained at home and the husband was employed in his father's retail automobile business - a year prior to the separation, the husband cashed investments received through an inheritance to finance his own automobile business - the wife made no direct contribution to the acquisition of the property, and a very minimal contribution to the operation of the business-the Court looked at the whole period of the marriage, rather than the approximate seven month period from the day the business commenced until the final separation, and decided that her household and childrearing responsibilities over that total period produced savings. That indirect contribution resulted in receiving 20% of the business valued at $356,858.00.
In not all cases does the provision by the wife of home and child care amount to an indirect contribution which entitles the wife to a share of business assets. In Blockberger v. Blockberger it was acknowledged that over a 20 year marriage which produced 4 children, the wife had provided effective management of household or childcaring responsibilities. However, the business property she was seeking to share with her husband were shares in a company which the husband had received primarily by way of gift or inheritance from his father. The shares which he purchased were paid for with funds granted to the husband by way of bonus from his Company. In deciding that the wife had not made an indirect contribution to the shares, the Court stated that "It would have made not the slightest difference to his acquisition of the shares if she had been a domestic slattern, a shrew, a neglectful mother, and an alcoholic to boot, instead of the model wife and mother she in fact was."
This case states that there must be a more direct link between the wife's indirect contribution and the acquisition by the spouse of the business property than effective management of household or childcaring responsibilities. Whether it or the earlier reported cases will be followed remains for a higher court decision.
|1.||Blockberger v. Blockberger,(1981) 23 R.F.L. (2nd) 177.|
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