Supreme Court of Canada decision concerning family trusts.

On February 18 the Supreme Court of Canada refused leave from the Saskatchewan Court of Appeal decision in Grosse v Grosse (2015).

The facts are straight forward. The parties were in a long term marriage. A family trust had been created that owned or controlled assets acquired during the marriage. The Husband was a trustee and a contingent beneficary along with the children who were also beneficiaries of the trust. The Wife was not a named beneficiary of the trust. The Wife upon dissolution of the marriage argued that the assets of the trust were family property and requested an equal share. The trial Justice had granted an "if and when" order that the trust assets would be shared with the Wife upon a disposition from the trust. 

The Saskatchewan Court of Appeal varied the trial decision and directed that the trust assets be valued and the Wife to receive her equal share immediately.

The decision of the Supreme Court of Canada refusing leave means that the Court of Appeal decision is binding.This decision has significant consequences for family law lawyers, trust lawyers and accountants setting up such trusts. In this decision and several others the courts have pierced the veil of family trusts, bypassed the discretionary entitlement issues  and distributed the assets of the trust as matrimonial property.

 Although there are differences  in each of the Canadian jurisdictions the basic  concept of  matrimonial property legislation  is that marriage is an "economic partnership and that assets acquired during the marriage are to be shared". Many jurisdictions including Alberta lean towards a broad definition of what is included as property and the only exclusions would be those set out in the statute( pre- marriage and or gifts that can be traced to existing assets). In Alberta there is a statutory presumption that if those non exempt assets were acquired as a result of the marriage  they should be shared equally.

Trust counsel and accountants need to be more aware of contemplating the consequences of  the possibility of marital breakup of a beneficiary when creating these trusts. They  should no longer not be looked at as providing a shield to a successful  matrimonial property claim in similar circumstances. Even a stated trust deed definition that a spouse ceases to be a beneficiary  if a separation occurs  is likewise probably now of no protection.