When parties are separating there are a number of issues to address. A Federal law, the Divorce Act deals with how and when the divorce can be obtained. It covers laws about parenting of children and support of both children and spouses in a divorce situation. If the parties were never married to each other there is no need to get a divorce, but parenting and support issues are pretty much the same as for those who did marry when there are children and economic interdependencies. Unmarried situations are covered in Alberta laws, chiefly the Family Law Act and the Adult Interdependent Partnerships Act.
So, you ask, what does that have to do with the headline of this post and the picture of Champ?
Where property is concerned in an Alberta separation and divorce between married people, there is an Alberta law called the “Matrimonial Property Act” which sets out the Court’s responsibilities in dividing property of married people. The date at which matrimonial property (married parties) is to be valued is determined by when the court hears the competing claims at a trial. Then the court requires the most up to date information about values, in order to allocate property between the parties. Property and debt acquired after separation continue to be considered by the courts as “matrimonial property” right up to the time the court decides the case.
Parties can decide to opt out of having the court divide their property by entering into a contract. But to be legally enforceable, that contract must be signed separate and apart from one another, with independent legal advice. And before signing it with their clients the lawyers are required to obtain the full financial disclosure that a court would require if it were a trial case. Accuracy of information is a precondition to binding contracts. Recently the Supreme Court of Canada made new law when they created a new common law duty of “honest performance, which requires the parties to be honest with one another in relation to the performance of their contractual obligations.”
That brings me to “valuation date” issues. Many parties believe that the date of separation is the date at which everything is divided or shared. But divorces and separations usually take awhile to conclude, especially if people feel the need to hash things out in court instead of in a mediation or collaborative law settlement setting. Even settlement processes don’t happen overnight. So, at some point people in settlement situations have to decide what date to pick to value what they own and owe.
Like the picture of Champ above, a property valuation date is a snapshot in time of a moving target.
The sooner people come to the settlement table and agree upon a date at which they will take their economic snapshot, the more accurate the property division will be. The longer they take, particularly with litigation timelines, the costs of valuing properties, assets and debts increases as valuations become dated and need to be updated.
Particularly when business valuations must be obtained, this can mean tens of thousands of dollars spent updating expensive valuations until a trial. Repeated snapshots provide information about changes, but not necessarily a firm value of the property, nor any information about whose efforts went into acquiring the property, running down the value of the property or running up the debts during the separation.
I always recommend to people separating that they get as much information and supporting documents as they can about income, property and debt values right at the time that the separation occurs. Then they can more easily track changes that occur during separation.
Law is Changing
The Matrimonial Property Act is being reviewed by the Alberta Law Reform Institute in 2014. The Institute has recommended to the government of Alberta that the Matrimonial Property Act be changed to require the courts to value the property and debts of married parties at the date of separation.
Taking this accurate snapshot in time becomes even more important. Values cannot be proven by imperfect memories and competing interests during an emotional time during a separation, but rather by the documents that tell the tale.
Plus as the law relating to the property of unmarried parties becomes more closely aligned with matrimonial property laws, as it is in some provinces in Canada, the same ” economic snapshot” and “financial disclosure” issues will arise in common law situations. We are not there yet, but that seems to be the direction of the courts.
The picture of Champ above is not the only picture I have, but it is the one that has permanently caught him briefly flying on the day he ran that race. I will have that picture forever.
When parties negotiate a final property contract, it is a forever legal snapshot as well. Be sure to take an accurate and timely picture.