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What happens to your pension on divorce?

There are many kinds of pension plans.  Most are subject to division upon marriage breakdown.  Marriage includes a common-law relationship of two years or longer.

Federal Government plans include the Old Age Pension Plan (OAP), Canada Pension Plan (CPP).

There may be foreign pension plans, military pensions and disability pension plans.  These are not discussed here.

There are federally regulated plans and provincially regulated plans.  They are all quite complex and each plan requires precise and specific language to effect a division.

The most common pension plans are employment pension plans and we will spend most of our time discussing these plans.

OAP

OAP is not divisible.  It is payable to most Canadians at age 65.

CPP

CPP is divided according to the Canada Pension Plan upon application by either spouse.  An equal division of CPP credits earned during a relationship is mandatory unless both parties elect not to divide the pension, for example if both parties have made maximum contributions during the relationship.

Employment Pensions

Employment pensions are often the largest or second largest family asset after the family home.  The portion of the pension earned during cohabitation is a family asset and your spouse is entitled to one half of that portion.  The Family Law Act has specific provisions for division of pensions on marriage breakdown.  Different rules apply if the pension has already commenced.

The two most common employment pensions are defined contribution plans and a defined benefit plans.

A defined contribution plan is very similar to an RRSP.  It is worth what it says it is worth (in pre-tax dollars) and it can generally be easily divided.

A defined benefit plan is a much more complicated investment.  It generally pays out based on your best (usually last ) five years of income and so the amount paid into the plan bears little resemblance to what the plan is actually worth.  It is often worth 3 to 5 times more than the contributions made.

The Family Law Act has detailed provisions for how a defined benefit plan should be divided.  Defined benefit plans are usually divided “at source”.  This means the pension plan is required to create a plan in the name of the spouse who becomes a “limited member”.  The credits accumulated during cohabitation are then divided equally.  The limited member then has the same elections to make as the prime member upon retirement.  The pension may be received on the earliest date that the prime member could retire.

In the alternative and generally only if both parties agree, the plan member can buy out the interest of a spouse. This way, the plan member can keep the pension intact and the spouse can be compensated with other assets if there are sufficient assets to do so. This requires hiring an actuary to value the plan.  An actuary is a highly trained and accredited specialist.  There are a number of assumptions that must to be made to come up with a range of value for the plan.

Written Agreements

Once spouses have agreed on how to divide their pension or pensions, the agreement must be put in writing and be signed.  The drafting of a marriage agreement, cohabitation agreement or separation agreement is complex and must be tailored to the individual plan.  If the drafting is insufficient, the pension plan will ignore a request for division.

Spouses can predetermine what will be done with pensions in a cohabitation agreement or marriage agreement (they amount to the same thing).  The agreement would specify what happens with child and spousal support, land, investments, the pension and any other assets that may exist.

Pensions are valuable assets, much more valuable than most people realize.  Be sure to incorporate this asset into your thinking.

Garth Edwards is a partner with Cohen Buchan Edwards and has practised family law for 33 years. Garth may be contacted at garthedwards@cbelaw.com or 604.273.6411.

What are Excluded Assets?

The division of family property in British Columbia changed in 2013 with the enactment of the Family Law Act.

The scheme of our new act is that all property that an individual brings into a marriage (which includes a common-law marriage of at least two years) is “excluded property”.  The increase in value of all assets during cohabitation including excluded assets is shared equally unless a court orders an unequal division of family assets under section 95 of the Family Law Act.  An unequal division is extremely rare and is only done where a court decides that it would be “significantly unfair” to divide assets equally.

The value of the excluded property when it was brought into the relationship would normally be paid back to the individual who brought it into the relationship “off the top” at its original value upon breakdown of the relationship.  In theory, if you sold a home for $100,000 10 or 15 or 40 years ago and invested that as a down payment in a new family home then you would receive $100,000 upon division of assets today.

Excluded property would include assets that either spouse had when they began cohabitation or assets that they brought in during the relationship by way of inheritance or windfall.  It may include a home, an investment, an RRSP or contribution to a pension.

The scheme is not as easy as it might sound.  You have to prove that you brought in the asset and trace it to an existing asset.  Proving that an asset existed 15 or 20 or 40 years ago can be very difficult as documents may no longer exist.  For example, obtaining bank documents or RRSP statements may be impossible unless someone has retained the paperwork.  Valuing the asset 15 or 20 or 40 years ago can be just as difficult.  For example, you may be required to obtain a historical appraisal of real estate.  Tracing the asset means that you have to show that it was used to acquire an asset such as a home or an investment, or paid down a debt on an asset such as the mortgage on a home.  You have to show that that asset still exists in some form today.

If the excluded asset was used to pay down credit cards or go on a holiday it is lost.  You cannot seek compensation for your contribution unless it still exists.

Determining potentially excluded assets is one of our biggest headaches in family law today.  The law is changing almost daily as a result of how judges are interpreting the Family Law Act.  If an excluded asset was put in the name of the contributors spouse alone, the exclusion may be lost.  If an excluded asset is put into joint names it may or may not be lost depending on how the courts rule in the future.

It is safest to retain assets that you bring into a relationship in your name alone in order to ensure that the exclusion is not lost.  This is difficult to do in any relationship and may be totally impractical.  To clarify what you as spouses want you should have this discussion now and create a marriage agreement or a cohabitation agreement while you are still on good terms.  This is good practice and good planning just as doing your will and saving for your retirement is.

Garth Edwards is a partner with Cohen Buchan Edwards and has practised family law for 33 years.  Garth may be contacted at garthedwards@cbelaw.com or 604.273.6411.

Settling Disputes Through Alternative Dispute Resolution Methods

Not all legal disputes need to be resolved in court.  Most family law cases settle using out-of-court alternatives.  These out-court-alternatives, or alternative dispute resolution methods, include mediation, arbitration, and the collaborative process.  It is not always possible to avoid court, but alternative dispute resolution methods are far more beneficial to resolve legal problems that come up when a relationship ends, especially if children are involved.

TYPES OF ALTERNATIVE DISPUTE RESOLUTION METHODS

  1. Mediation

Mediation is a type of negotiation that is assisted by a neutral, third party called a mediator.  Although a mediator does not have decision-making power, he or she can assist the parties with identifying the issues between them, and help negotiate and reach a resolution.  Parties can attend the mediation alone, or with a lawyer.

  1. Arbitration

Parties who cannot agree on some or all of the issues in their family law dispute can attend arbitration.  Often, each of the parties will bring their own lawyer to the arbitration.  An arbitrator is an independent third party who acts like a judge.  He or she will listen to both parties, and then make a decision that is legally binding and enforceable in court.

  1. Collaborative Process

In the collaborative process, the parties and their lawyers work together, and utilize other professionals, such as divorce coaches, to create solutions that work for both parties.  The collaborative process requires the parties to agree not to go to court, to have open and honest communication, and to work as a team to resolve their dispute.

BENEFITS OF USING ALTERNATIVE DISPUTE RESOLUTION METHODS

  1. Non-adversarial and flexible

When parties mediate or engage in the collaborative process, they are in control.  They are directly involved in the process, and work together to come up with creative solutions to resolve their disputes.

  1. Less expensive and time-consuming

The cost of litigation is high and unnecessarily drains family resources, particularly because the process takes a lot of time.  Alternative dispute resolution is often cheaper, and less time-consuming and stressful than going to court.

  1. Private and confidential

As alternative dispute resolution occurs outside of the court, it avoids publicity of personal information.  The only people in attendance are the parties, their lawyers, and/or the mediator or arbitrator.  Negotiations are private, and cannot be introduced as evidence if the parties proceed to court.

  1. Preserves important relationships

Since alternative dispute resolution methods encourage team work, it encourages the parties to maintain a mutual respect and helps maintain relationships in the future.  When children are involved, it encourages positive co-parenting.

If you have questions about alternative dispute resolution, or are looking for a mediator or collaborative process lawyer contact Cohen Buchan Edwards LLP at 604.273.6411 and speak with one of our family lawyers.

It’s Not Always Equal in the End

The end of a marriage or a long-term relationship can be a difficult time for all individuals involved.  Eventually, the parties must deal with dividing the assets they own, whether held jointly or in their individual names.  The Family Law Act states that family property will be divided equally, unless the parties have a written agreement stating otherwise.  However, this is not always the case.  Family property may be divided unequally if it is “significantly unfair” to divide it equally between the parties.

The courts will not easily grant an order for unequal division of family property, and the test to obtain such an award is strict.  However, under the right circumstances, a party may be successful.  The court will consider a number of factors, such as:

Recent cases provide lawyers with some guidance in advising their clients regarding unequal division of family property:

  1. In Nanara v Nanara2017 BCSC 1447, the Claimant was successful in receiving 60% of the family property. Justice Abrioux concluded it would be significantly unfair to divide the family property equally because the Claimant made significant financial and non-financial contributions to the family property during and after the relationship, and was solely responsible for all family expenses.  Also, the Respondent lack of disclosure of the value of his pensions and other assets was a relevant factor.
  2. In H.H. v C.L.M., 2017 BCSC 1299, the Respondent was successful in her claim for unequal division of the increase in the value of the property she owned. Madam Justice Young based her decision on factors including the significant difference in the parties’ financial contribution to the household, the Claimant’s unequal contribution to the renovation and restoration of the property, and the misconduct of the Claimant, including the taking of unauthorized loans and the hiding of income.
  3. In Bamford v Mulyati2017 BCSC 945, Madam Justice Morellato apportioned 80% of the parties’ family property to the Claimant and 20% to the Respondent. Factors considered included the length of the parties’ relationship; the Respondent’s lack of financial contribution to, and maintenance, of the family property during the marriage and after separation; the Claimant was in his 80s and retired for 20 years; the Respondent fled to Jakarta, did not disclose her income or value of her assets; and the Respondent failed to respond to the court proceedings.

Property division is complex, often involves assets that are substantial in value, and is decided on a case-by-case basis.  It is important for recently separated individuals to obtain legal advice before making any decisions to divide family property to ensure there is a fair division of family property.

If you have questions about family property and asset division, contact Cohen Buchan Edwards LLP at 604.273.6411 and speak with one of our family lawyers.

Additional Property Transfer Tax on Foreign Buyers

In British Columbia, a general property transfer tax is payable on all property transactions involving a change to the property’s title, including:

The amount of tax payable is based on the fair market value of the property on the date of registration except for pre-sold strata units.  The tax is charged at a rate of:

For example, if the fair market value of a property is $2,500,000, the tax paid is $53,000.

Effective August 2, 2016, an additional 15% property transfer tax was introduced in British Columbia on real estate transactions and is additional to the general property transfer tax.  This tax applies to:

This tax does not apply to:

For properties that have a residential component, such as farm land, this additional 15% property transfer tax will apply to the residential component.  In other words, the tax will be paid on the portion of the purchase price prorated to the residential portion.

For more information, please visit gov.bc.ca/propertytransfertax.  For enquiries on this topic, please contact one of the lawyers in our Real Estate Group.

Common Law Severance

With some exceptions, Canadian employers are permitted to terminate an employment relationship at any time without cause, provided the employee is given proper notice, or pay in lieu of such notice.

Statutory severance

The minimum payment or notice that an employer must provide in the event of a termination without cause, is set out in employment standards legislation. In British Columbia, the applicable legislation for most employees, is the Employment Standards Act (British Columbia).

For the minimum severance obligations set out in the Employment Standards Act (British Columbia) to apply, it must be clearly stated in the employment contract between the employer and the employee. If there is no employment contract, or the employment contract does not have a termination provision, or the termination provision is ambiguous, an employer must give the employee notice or payment in lieu of notice, in accordance with what the courts have decided as being reasonable. This is called reasonable notice or common law severance.

Common Law severance

The amount of reasonable notice that an employer is required to give depends on the facts of each case and the following factors are key:

• The employee’s age
• How long the employee has worked for the employer
• The employee’s position, including salary
• Availability of similar employment

Generally, older employees, or employees who have worked for a longer period of time, will be entitled to more notice. However, one must also consider the nature of the position and the availability of similar employment. For example, a younger employee who has only worked for a short period of time, could still be entitled to a lengthy notice period if that employee does a very specialized job that would make it hard for the employee to obtain comparable alternative employment.

Structuring the severance

Common law severance can be structured in a number of ways such as working notice, pay in lieu of notice, salary continuance, or a combination of these options.

Employers should seek legal advice when structuring severance packages as the courts are very strict about employee entitlements. For example, when an employee is given pay in lieu of notice, the employee is also entitled to any other benefits that he or she would normally have received during the period corresponding to the notice period.

With some exceptions, Canadian employers are permitted to terminate an employment relationship at any time without cause, provided the employee is given proper notice, or pay in lieu of such notice.

For more information, contact Joseph Cuenca at josephcuenca@cbelaw.com or 604.273.6411.

Cohen Buchan Edwards has moved

Cohen Buchan Edwards LLP has moved, our new location at 290 – 13777 Commerce Parkway, Richmond, BC V6V 2X3.  All telephone numbers and email addresses remain the same.

We are located just west of No 6 Road, the third driveway in. Visitor parking is available near the front of the building. CBE also has three reserved spaces at the rear of the building nearest the round about, marked Reserved 24 hours Cohen Buchan Edwards.

Common Mistakes of Power of Attorney for Real Estate or Land Purposes

Generally speaking, in British Columbia, a Power of Attorney is effective as long as it is prepared in accordance with the Power of Attorney Act of British Columbia.  Having said that, the Land Title Office of British Columbia has specific requirements when it comes to dealings with real property using a Power of Attorney.  In order for the Land Title Office to accept documents signed by way of a Power of Attorney such as a transfer form transferring title or a mortgage form granting a mortgage to a lender, the original or certified copy of the Power of Attorney must first be filed.  If the Power of Attorney does not meet the requirements of the Land Title Office, it will not be accepted for registration and therefore not effective for land purposes.  Any documents signed with the related Power of Attorney will not be accepted and an attorney may not be able to sell, purchase, mortgage or otherwise deal with real property.

Some of the common mistakes of Powers of Attorney are:

  1. Differences exist between the name of the adult in the Power of Attorney and the name of the registered owner. The Land Title Office requires the names to be exactly the same. Eg. if the name of a registered owner on title is “John Smith”, the name on the Power of Attorney must be “John Smith”, not “John Adam Smith”.If a registered owner of a real property has plans to use a Power of Attorney to deal with the property, such as selling the property, it is prudent to review or conduct a title search of the specific property to check the name on title before preparing the Power of Attorney.

    If a registered owner uses different versions of his or her name on different titles of different properties, more than one version of the Power of Attorney may have to be prepared.

    The difference in the name of the adult in the Power of Attorney and the name on title is a common mistake. This creates a problem if the registered owner tries to sell the property by Power of Attorney. If the mistake is not identified ahead of the completion date of the sale, the transfer form changing title of the property will be rejected by the Land Title Office and the sale cannot be completed.

  2. A Power of Attorney contains alternate names for the attorney with reference to “also known as” or “aka”. Eg. “This Power of Attorney is given by John Smith also known as John Adam Smith”. Such wording is not acceptable for registration purposes. The use of alternate names will result in the Land Title Office’s decline to register the Power of Attorney.
  3. The attorney executes a transfer to himself or herself without the Power of Attorney expressly authorizing it. According to section 26 of the Property Law Act of British Columbia, an attorney cannot sale, transfer or convey land owned by the registered owner to the attorney himself or herself unless the Power of Attorney expressly authorizes the attorney to do so or the registered owner ratifies such sale, transfer or conveyance.

These mistakes will result in the Power of Attorney being rejected for registration at the Land Title Office, and thus useless for land purposes.

Other than the above common mistakes, there are also issues relating to the form of the Power of Attorney. If the Power of Attorney is a “springing” or “contingent” Power of Attorney that is only effective upon the happening of a specified event, any documents executed by way of the springing or contingent Power of Attorney filed at the Land Title Office must be accompanied by satisfactory evidence that the event stated in the Power of Attorney has occurred.  Eg. if the event is the adult becoming mentally incompetent, as proven by two physicians licensed to practice medicine in the jurisdiction in which the adult is located, then two medical opinions confirming that the adult has become mentally incompetent must be provided to the Land Title Office to prove that the Power of Attorney is in effect.

It is therefore important for the Power of Attorney to be prepared correctly in the first place. While there are pre-printed Power of Attorney forms available from websites or legal stationers, these forms are not tailor made to be suitable for all situations.  When it comes to real property, these forms are not “one size fits all”.  A Power of Attorney may be a simple form but care must be taken in its preparation and questions asked in order to ensure that the Power of Attorney can be used for its intended purposes.

RELATED LINKS:

For more inquiries on this topic, please contact one of the lawyers from our Real Estate Group.

Cohen Buchan Edwards LLP Gives Back to the Community

Cohen Buchan Edwards LLP has always given back to the community. It’s the place where they’ve lived and worked for decades. They have always appreciated what the Richmond Christmas Fund does for everyone in the community.

Shown here presenting a cheque to Rob Howard of the Richmond Christmas Fund are three of their partners: Barry Grabowski, Garth Edwards and Joseph Cuenca.

Thank you Cohen Buchan Edwards LLP for making a real difference in the community that you are a big part of!

Original Article: http://www.dreamproject.ca/2016/cohen-buchan-edwards-llp/

Alcohol Liabilities at Office Parties

It is once again that time of year when employers are most likely to host holiday events. For many employers, these year-end parties are a way of saying “thank you” to their employees. They also provide an opportunity for team building and strengthening collegiality.

While the expectation is that everyone will have a memorable night, it is important for employers to remember the legal responsibilities that accompany the serving of alcohol at social events.

In a nutshell, employers are responsible for ensuring that their employees make it home safely without injuring either themselves, or others, in the process. This liability can be as a result of the employer being the social host or the occupier of premises in which alcohol is served.

Liability as a Social Host

An employer’s liability as a social host arises when an employer supplies the alcohol for the event, regardless of the location at which the alcohol is served.

Liability as an Occupier

An employer’s liability as an occupier arises if someone is injured in the workplace or on property that the employer may rent for the purpose of hosting the event. Depending on the circumstances, an employer hosting a party at the employer’s home, could also be liable as an occupier if someone is injured on the premises.

Tips to Minimize Liability

To avoid liability completely, employers could host alcohol-free parties and forbid alcohol consumption at employer-sponsored events. However, this is likely to reduce attendance at these events and make them less “fun and memorable”.

Fortunately, employers can minimize potential legal liability in a less “draconian” way, by taking the following steps:

Originally published by author on December 10, 2015 in Small Business BC Online