Pension Plans and Divorce
Pension Plans and Divorce
In Ontario, Canada, the division of pension plans during a divorce is governed by the Family Law Act (FLA) and related regulations. Pensions are considered "family property" under the FLA, and their value is subject to equalization between spouses when a marriage ends. Here's a breakdown of how it works:
1. Pensions as Family Property
- Under the FLA, the value of a pension plan accumulated during the marriage is included in the Net Family Property (NFP) calculation. NFP is the total value of assets (minus debts) that each spouse has acquired during the marriage, and the spouse with the higher NFP typically pays an equalization payment to the other to balance things out.
- The pension’s value is calculated from the date of marriage to the date of separation (known as the "valuation date").
2. Valuing the Pension
- For defined benefit pension plans, the value is set by the pension administrator. It’s based on a formula using years of service, salary, and plan terms. This is often a complex actuarial calculation.
- For defined contribution pension plans, the value is straightforward. It’s the total contributions made during the marriage plus investment growth up to the valuation date.
- The pension administrator typically provides a Family Law Value (FLV) using standardized forms (e.g., Form FL-1 or FL-2) under Ontario’s Pension Benefits Act. This ensures consistency in how pensions are valued for divorce purposes.
3. Dividing the Pension
- Once the pension’s Family Law Value is determined, it’s included in the NFP calculation. The spouse with the pension doesn’t necessarily "split" it directly; instead, its value is equalized through a payment or offset against other assets (e.g., the matrimonial home).
- Since 2012, Ontario law permits an immediate division of the pension at source, directly from the pension plan. This happens if both spouses agree or a court orders it. This is called a "pension division" under Section 10.1 of the FLA. The non-member spouse can:
- Receive a lump-sum transfer to a locked-in retirement account (LIRA), or
- In some cases, receive a portion of the pension payments when the member spouse retires (though this depends on the plan’s rules).
4. Steps in the Process
- Disclosure: Both spouses must fully disclose their pension details.
- Request Valuation: The pension plan administrator is contacted to calculate the FLV (this may involve fees).
- Negotiation or Court Order: Spouses agree on how to equalize the value (e.g., lump-sum payment or asset tradeoff), or a court decides if they can’t agree.
- Division (if applicable): If opting for a direct split, the necessary forms are submitted to the pension administrator.
5. Key Considerations
- Pre-Marriage Value: Any pension value accrued before the marriage is excluded from equalization, but growth during the marriage is included.
- Federal Pensions: If the pension is from a federal job (e.g., public service), the Pension Benefits Division Act may apply instead, which has its own rules.
- Spousal Consent: Some pension plans require the non-member spouse to waive rights to survivor benefits, which should be addressed in a separation agreement.
- Taxes: Pension transfers for equalization are typically tax-neutral if done correctly, but professional advice is recommended.
6. Practical Tips
- Get a lawyer or financial expert involved—pension plan division prior to divorce can be tricky, especially with defined benefit plans.
- Obtain a separation agreement or court order to clarify how the pension will be handled.
- Contact the pension plan administrator early to understand their specific process and timelines.
When a marriage ends, the spouse with the higher income may need to pay spousal support. This payment helps to address financial disparities for the spouse with lower income. Spousal support obligations also exist when a common-law relationship ends.
Spousal support is not automatic. The person seeking support must demonstrate entitlement based on factors like: Compensation for economic disadvantages caused by the relationship, such as one spouse sacrificing career opportunities to raise children or support the other’s career. Addressing financial need or dependency, especially if one spouse cannot support themselves post-separation due to the lifestyle established during the relationship. Pre-existing agreements (e.g., marriage contracts) may also dictate support obligations.
When determining Spousal Support Courts assess several factors including: a) Length of the relationship; b) Roles and contributions during the relationship (e.g., homemaker vs. breadwinner); c) Income disparity between spouses; d) Age and health of both parties; e) The financial needs and ability to pay of each spouse.
The Spousal Support Advisory Guidelines (SSAG), though not legally binding, are widely used by Ontario courts to determine the amount and duration of Spousal Support. These guidelines consider income, length of relationship, and whether there are children. For short marriages, support might be time-limited. For long marriages (e.g., over 20 years), it could be indefinite, especially if one spouse cannot become self-sufficient. Support can be paid as a lump sum or periodically (e.g., monthly).
Spousal support can be agreed upon through negotiation or a separation agreement. It can also be ordered by a court if the parties cannot agree. If disputed, a court application is filed, and a judge decides based on evidence like financial statements, affidavits, and testimony.
How much spousal support is payable and for how long depends also on a number of other factors. This can be best explained by your family lawyer after discussing your specific circumstances . Mysupportcalculator.ca is a website which may help you get more details about spousal support payable in your particular situation.
A SEPARATION AGREEMENT is a contract between two people who are ending a marriage or a common-law relationship. It is used to settle all or some of the issues arising from their relationship's breakdown. Such an agreement can contain almost anything relevant to ending your relationship, including who will have child custody decisions, spousal support obligations, and decisions regarding how property will be divided.
It is important to remember that entering into separation agreement has a serious and lasting impact on your rights and obligations. Consulting a lawyer is advisable for assistance in preparing and negotiating this agreement.
By agreeing on terms privately, through the negotiation or mediation the separation agreement reduces the need for court intervention, saving time, money, and emotional stress. While not mandatory, courts typically respect these agreements if they are fair, negotiated in good faith, and meet legal requirements. However, in order to reach an agreement, both parties have to want to negotiate and voluntarily enter into the agreement.
Once signed and witnessed the agreement becomes enforceable like a contract. If one party breaches it (e.g., fails to pay support), the other can seek enforcement through the courts.
When negotiating a separation agreement, financial disclousure is extremely important. When parties are negotiating support and property based issues, they have to fully disclose their financial circumstances to each other. Mutual exchange of financial information dispels the potential for the other party to claim ignorance of your financial circumstances. This could give them grounds for challenging final agreement later on in the future.
Both parties increase the integrity of a separation agreement by obtaining independent legal advice. As you can imagine - a separation agreement is a very complex document, and drafting it is best left to a lawyer.
RESTRAINING ORDER
Domestic violence is a serious issue that impacts numerous families, involving physical or emotional abuse within a household and may necessitate a RESTRAINING ORDER. We understand the toll domestic violence takes on victims and their loved ones. Our goal is to provide expert and compassionate legal support so you don’t have to face it alone. If you were assaulted or threatened by your spouse/partner - you can ask the court for a restraining order. Such order may require your spouse or partner to stay away from you. It can also be more specific, stating that your spouse or partner must not come to your home, workplace, or children's school. It may also include other frequent locations, such as your place of worship or your parent's home.
If your spouse/partner disobeys the restraining order, you have to call the police. The police will want to see a copy of the order so you should keep it with you at all time. Your spouse or partner can be arrested if the police believe they have disobeyed the court issued order. They may also be charged with a crime.
Usually one applies for restraining order as part of a larger court proceeding, but it is possible to apply for such an order alone. The process can take many months. It will require a formal submission, evidence, and a hearing at which both sides can make their claims.
In some circumstances, a person who fears for her/his immediate safety can ask the court for an “ex parte restraining order”. In such a case, your ex-partner is not notified of the application, and the judge can issue the order immediately. This type of order typically is typically short lived. It is intended to keep you safe while your ex-partner is notified. Your ex-partner will then have the opportunity to tell his or her side of the story.
OPINIONS REGARDING VALIDITY OF FOREIGN DIVORCES
OPINIONS REGARDING VALIDITY OF FOREIGN DIVORCES
If you plan on getting married in Ontario, and you were previously divorced abroad, you must obtain a letter form an Ontario lawyer stating that your divorce should be recognised in Ontario in order to get a marriage licence.
For such a letter to be issued, you will need:
1. Your divorce order or decree.
2. A certified translation of your divorce order or decree if it is not in English.
3. A copy of your marriage licence application.
4. A statement written and signed by you about where you lived prior to your divorce.
The price for writing an opinion letter regarding validity of a foreign divorce is usually a fixed price.
MATRIMONIAL HOME
The family home is a special place and the law treats it as such. If you are married, both you and your spouse have an equal right to stay in your home, even if only one of you is a legal owner. Neither spouse can rent it, sell it, or mortgage it without the other spouse’s consent. This is true even if only one of the spouses owns the matrimonial home.
A matrimonial home brought into marriage will be subject to equalization. So will a matrimonial home received as an inheritance or gift from a third party during a marriage.
The definition of a matrimonial home is broad. Married couples can own more than one matrimonial home. Often properties such as cottages, trailers, and second homes are considered matrimonial homes.
FAMILY LAW LITIGATION
Litigation in a family matter is best to be avoided, but not always possible. I am a great believer in negotiated settlements resolving all the issues arising from the parties’ separation or divorce. Settlements create less stress in the lives of the parties and their children. They do not escalate conflict, tend to be better tailored to parties’ needs, are confidential, can be reached much faster than court decisions, and are less expensive. Unfortunately, they are not always possible. When one of the parties displays bad faith by not being entirely forthcoming about his or her financial situation, trying to hide income or dissipate assets, or simply taking unreasonable positions unjustified by the law, litigation can be the only option. No matter how unwelcome it is, litigation may become necessary.
The steps and length of litigation depend on the number of issues to be resolved. It also depends on how complicated the issues are, the level of hostility between the parties, and the level of the court that decides these issues. It is fair to say that litigation almost always takes much longer than the parties would wish it to take. Wait times and delays are built into the court process; court appearances are never scheduled soon enough, and adjournments of scheduled appearances are not uncommon.
Trial is the final step in the family law litigation process. At the trial, the Judge decides any unresolved issues for the parties. The Judge’s decision is final and binding.
Read more in the attached article.
INDEPENDENT LEGAL ADVICE
Independent legal advice is required in many family law matters. It ensures that the interests of all the parties are protected. Independent legal advice is advice from a lawyer who is not acting for, and is not connected to, any other person in the dispute. For example, if the wife has a lawyer, that lawyer may provide independent legal advice to the wife. However, they cannot provide independent legal advice to the husband. Independent legal advice informs an unrepresented party about the nature and consequences of his or her decisions.
Independent legal advice is most commonly sought prior to entering into some agreements, such as marriage or separation agreements, especially in situations when one of the parties is unrepresented. Agreements entered into without independent legal advice are prone to being overturned by the court. It is important to remember that to be valid, all family law agreements have to be negotiated based on full financial disclosure by both parties. A lawyer providing independent legal advice on family law agreements must be aware of the financial situations of both parties. This awareness is crucial to make the advice meaningful.
According to the Family Law Act, independent legal advice is mandatory for family arbitrations. Any award from an arbitration must involve both sides receiving independent legal advice. Without this, the award will not be enforceable in court.
A lawyer acting as a mediator and preparing a draft contract for consideration by the parties in mediation should advise them to seek independent legal advice before signing it.
A lawyer providing Independent Legal Advice needs to perform a detailed review of the parties’ financial disclosure, and carefully read the Draft Agreement. The lawyer also needs to interview the client to find out their priorities, objectives, and expectations. The lawyer must explain the meaning of any agreement the client is about to enter into. In most situations, it is necessary to provide the client with a written document explaining the meaning of the Agreement.
Providing Independent Legal Advice is crucial and time consuming and involves more than just "rubber stamping" as clients might expect. The fee for providing Independent Legal Advice is based on actual time spent which is seldom less than 5 hours.
In some situations, the lawyer providing Independent Legal Advice becomes involved in negotiating changes to the Draft Agreement. This results in additional time being spent.
FINANCIAL DISCLOSURE-FAMILY LAW
FINANCIAL DISCLOSURE
I hear the same thing from most of my clients – they want their family matters resolved fairly and efficiently. They also want resolutions without delay and without the need for court proceedings. These goals can only be met by providing timely and accurate financial disclosure.
In a nut shell, financial disclosure is a corner stone for resolving issues in family law. Lawyers do not negotiate final settlements without it, mediators do not mediate without it, and courts do not allow parties to proceed without it.
ENFORCEMENT OF ORDERS
In Ontario, enforcement of orders in a family law matter like child or spousal support can be done through a provincial government office called the Family Responsibility Office (FRO). This office also handles enforcement of separation agreements that resolve issues of child or spousal support. If you get a court order for child support, the court will automatically file it with FRO. If child support is payable pursuant to a separation agreement, you can file the agreement with the FRO yourself. Ensure you have filed the agreement with the court and mailed a copy to the FRO. Visit the FRO’s website for more information: http://www.mcss.gov.on.ca/en/mcss/programs/familyResponsibility/
Once the support order or separation agreement is filed with the FRO, it is the FRO, not the other parent or spouse, who is responsible for enforcing it. If the payor fails to make a support payment, the FRO will take action. They will enforce the support order or separation agreement. The Family Responsibility Office can employ a variety of different methods to obtain the child support payments that are owed.
The FRO can:
- get the payments directly from the payor parent;
- have the payments automatically deducted from the payor parent’s or spouse’s salary, wages or other income;
- register a charge (a lien) against the personal property or real estate of a payor parent or spouse who fails to pay the support that he or she owes;
- garnish (take money from) the bank account of a payor parent or spouse who fails to pay support. They can also garnish up to 50% of a joint bank account that the payor shares with someone else.
- make an order against another person who is helping a payor parent or spouse hide or shelter income or assets that should go toward child support.
The FRO can put more pressure on parents and spouses who do not make their support payments by:
- suspending their driver’s licenses;
- reporting them to credit bureaus so that it will be difficult for them to get loans;
- cancelling their passports.
In case of orders or agreements not involving payments of child support or spousal support, different methods of enforcement are available. An application can be brought to court to enforce the order by a writ of temporary seizure of property, a contempt order. Additionally, the court can appoint a receiver under section 101 of the Courts of Justice Act.
