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Married and Civil Union Spouses - The consequences of your union

Family Patrimony

In 1989, Quebec adopted a law that profoundly changed the legal relationship between married people. The Act respecting economic equality of the spouses, or Bill 146, entered into force on July 1, 1989 and introduced the provisions on family patrimony into the Civil Code of Quebec. These provisions were meant to encourage economic equality between spouses in the event of a break-up or death. Since June 24, 2002, this protection has also been offered to couples who enter into civil union.

In this Infosheet, Éducaloi explains what the family patrimony includes and how it is divided.

To whom do the provisions on the family patrimony apply?

As a general rule, these provisions apply to all married or civil union couples residing in Quebec, with or without children, regardless of the date of their civil union or marriage.

These provisions do not apply to de facto spouses and, therefore, there is no family patrimony between them.

The law provides certain exceptions; spouses are not subject to the provisions on family patrimony in the following cases:

• if they were involved in a separation from bed and board, divorce, or annulment proceedings prior to May 15, 1989;
  
• if they stopped living together prior to May 15, 1989, provided that they had entered into a written or other agreement settling all of the issues related to their separation.

In addition, couples who were already married when the law entered into force could sign an “exclusion agreement” exempting them from the provisions on family patrimony. This agreement had to be notarized and signed by December 31, 1990. Some tens of thousands of couples opted for exclusion.

Aside from the exceptions provided for by law, the provisions on family patrimony apply to all spouses residing in Quebec, even if they were married outside of the province.

What is family patrimony?

Family patrimony is a direct effect of a civil union and a marriage; it applies to all married or civil union couples regardless of their civil union or matrimonial regime.

Family patrimony includes the following property:

• the family’s primary residence;
  
• the family’s secondary residence or residences;
  
• the furniture in these residences;
  
• motor vehicles used for family purposes;
  
• accrued benefits under a pension plan during the civil union or marriage, including RRSPs;
  
• registered earnings of each spouse during the marriage or civil union under the Act respecting the Quebec Pension Plan or similar plans.

This property forms part of the family patrimony regardless of which spouse is the owner. The family residence forms part of the family patrimony regardless of whether it is publicised (that means registered at the Registry Office) in the name of one spouse or both.

Property owned by a third party (for example, a leased car) is not included in the family patrimony because the property must belong to one or both of the spouses.

Note that these provisions do not mean that both spouses own the property. Therefore, a family residence registered in the name of one spouse belongs solely to that spouse, but the other spouse will be entitled to a share of the building’s net value when dividing up the family patrimony.

What property is usually excluded from the family patrimony?

Property received as a gift or in a succession before or during the marriage or civil union is excluded from the family patrimony. Here is a non-exhaustive list of other property that is generally not included in the family patrimony:

• investments (except RRSPs, which are part of the family patrimony);
  
• businesses;
  
• company shares;
  
• farms (except for the part used as the residence);
  
• property not used for family purposes.

An antique car never used to drive the family, a fishing lodge only used occasionally by one spouse, or a computer used exclusively by one spouse are examples of property that is not part of the family patrimony.

When is the family patrimony partitioned?

Family patrimony is partitioned in the event of:

• separation from bed and board;
  
• a divorce;
  
• an annulment of the marriage;
  
• dissolution of the civil union;
  
• an annulment of a civil union;
  
• the death of one the spouses.

If the family patrimony was partitioned during a separation from bed and board, it will not be re-partitioned during a divorce or upon the death of one of the spouses. If, in the meantime, a separated couple decides to live together again, the date on which they started living together again replaces the date of the marriage or civil union for the purposes of applying the rules to a new division.

Both spouses can generally do as they wish during the marriage or civil union with the property they own, subject to a few limitations:

• the family residence: the owner-spouse of a building with fewer than five dwellings cannot sell, mortgage, or alienate it (for example, give it away) without the other spouse’s consent. If the residence is rented, the tenant-spouse cannot sublet, assign, or terminate the lease without the consent of the other spouse if the landlord has been notified that the dwelling is used as the family residence (consult the Infosheet entitled The family residence).
  
• furniture that furnishes or decorates the family residence: the owner-spouse cannot sell, alienate, or transport it from the family residence without the other spouse’s consent.
  
• partnership of acquests: the owner-spouse can only give away certain property with the consent of the other spouse (consult the Infosheet entitled Partnership of acquests).

How is the family patrimony partitioned?

Partitioning the family patrimony is a step-by-step process:

• First, the market value of all the property in the family patrimony is established;
  
• Then, the total amount of debt incurred to acquire, improve, maintain, and preserve the property that makes up the family patrimony is determined;
  
• Any debts are subtracted from the market value, which provides the net value of the family patrimony;
  
• Other deductions provided for by law are applied to property forming part of the family patrimony, if necessary (see the question on this matter);
  
• Finally, the calculated net value of the patrimony is distributed equally between the spouses.

When and how can the family patrimony be evaluated?

Property value is established on one of two dates:

• The date one of the spouses died, the date when divorce, separation from bed and board, or annulment proceedings are instituted, or the date of the dissolution or annulment of a civil union;
  
• The date the spouses stopped living together if they did so before one of the dates mentioned above. The court must consent to having the property evaluated on this date.

Property is evaluated according to its market value, that means the amount it could be sold for (or the cash-in value in the case of pension plans) on the evaluation date. Market value should not be confused with replacement value; it is not a question of how much a new refrigerator would cost you, but how much your present refrigerator is worth.

Spouses may agree between themselves as to the value of their property or can rely on outsiders, such as experts, to evaluate their property. Here are some examples:

• primary and secondary residences: you can use the municipal evaluation roll or seek the opinion of a certified appraiser or real estate agent;
  
• furniture: you can ask a used furniture salesperson or a professional appraiser for their opinion;
  
• vehicles: you can ask your mechanic or car dealer for their opinion or consult specialized guidebooks (for example, the “Red Book”).
  
• earnings accumulated in a pension plan: it is advisable to ask the plan’s administrator for an evaluation;
  
• RRSPs: RRSPs are part of a pension plan’s accumulated earnings, but are easier to evaluate; usually you simply consult your most recent statements.

Benefits earned under the Quebec Pension Plan can be evaluated by applying for a “simulated partition”, which will estimate the results of an eventual partition. For more information, you can telephone the Régie des rentes.

The most important assets for the majority of Quebec couples are the family residence and accumulated pension plan benefits. It is usually easy to evaluate a residence. The same cannot be said for pension plans, so you should not rely solely on periodic statements of pension contributions. A specialist, usually an actuary, can determine the value of benefits to be shared using complex calculations. The results may surprise you!

When and how are the debts of the family patrimony evaluated?

The same date used to evaluate property is used to evaluate any debts related to the family patrimony.

Any debts incurred to purchase, improve, maintain, or preserve property must be deducted from their market value because it is the family patrimony’s net value that is divided.

Therefore, the balance on a mortgage loan used to purchase the family residence will be deducted. Sometimes one spouse will get a loan secured by the mortgage on the house, but will use this to finance their business. This loan will not be deducted from the residence’s market value.

Only the balance of the outstanding debts on the evaluation date will be deducted, not the total amount of payments already made. For example, it is not a question of calculating the entire amount paid for the family residence, but of determining the amount still owed by the mortgage holder.

What other deductions are legally allowed?

In addition to debts incurred to acquire, improve, maintain, and preserve the property of the family patrimony, the following deductions may be made:

• if one spouse owned property before the marriage or civil union that is now part of the family patrimony. For example, the net value of a house owned by one spouse at the time of marriage or civil union that has since become the family’s primary residence will be deducted so that the value is recovered during partition.
  
• if one of the spouses uses property received as a gift or an inheritance to acquire or improve property that is part of the family patrimony. For example, the amount of money inherited and used by one of the spouses to buy the family residence will be deducted so that it is recovered during partition.
  
• appreciation during civil union or marriage. Using the example of a spouse who owned a house before the civil union or marriage, if the value of this house has increased the owner-spouse will benefit proportionally from the appreciation.
  
• “re-investment” of property owned before the marriage or civil union. For example, if a spouse who owns a house before marriage sells it during the marriage to buy another house for the family to live in, the same rules will apply as though it had not been sold.

As you can see, complex calculations may arise. That is why it is normally recommended that couples consult a lawyer on this subject.

How can one spouse pay the other what is owing once the family patrimony is partitioned?

Partition may be settled “in cash” or by “payment in kind” once the calculations have been completed.

Suppose that once the calculations are complete, one spouse owes $20,000 to the other. She may choose to pay him the $20,000 or they may agree that she will give or transfer property worth $20,000 to him.

It would be wise to consult a professional before entering into this type of arrangement because one of the spouses may end up being penalized as a result of certain tax provisions. For example, capital gains earned from the sale of a cottage are taxable, which is not the case for a principal residence. In the situation described above, if one spouse transfers a cottage worth $20,000 to the other spouse instead of paying the money, that other spouse may have to pay tax when she resells the cottage.

Tax law allows “tax-free RRSP rollovers” between spouses. The spouse who owes $20,000 to the other spouse may offer to “rollover” or transfer the amount from her own RRSP into his RRSP, but the impact of this choice is that the other spouse will be taxed when he starts to withdraw the money from his RRSP.

Most pension plans governed by Quebec law contain special provisions applicable to partition. Only half of the earnings in a spouse’s pension plan can be transferred even if both spouses ask otherwise. The other spouse must invest the share to which she is entitled into an authorized “investment vehicle,” such as an RRSP.

For example, suppose one spouse is a professor and his pension earnings are worth $100,000; his wife cannot get more than $50,000 and she must invest this amount in a legally authorized investment vehicle. She will then be taxed on this income when she starts withdrawing it, just as the husband will be taxed on his earnings when he retires.

Do not hesitate to consult a professional and inform yourself about the long-term consequences of the choices before you.

Lastly, the court enjoys a certain amount of discretion as to how the partition is to be executed. The court can, among other things, order a spouse to make payments in instalments to the other or allocate property to one of the spouses as total or partial payment for her share.

Can I ask that the family patrimony be partitioned unequally?

The court, if asked to do so by one of the spouses, is legally allowed to derogate from the rule of equally partitioning the family patrimony if it would lead to an injustice given:

• the brief duration of the marriage or civil union;
  
• that one spouse squandered certain property;
  
• the bad faith of one of the spouses.

For example, if shortly after your marriage you purchased a house in which you lived with your new spouse and three months later your spouse filed for divorce, you can ask the court to exempt you from sharing the value of your residence.

Here are some other circumstances that could give rise to an unequal partition:

• one of the spouses invested his income in property included in the family patrimony while the other spouse only purchased excluded property;
  
• one spouse consistently refused or neglected to fulfill his family obligations while the other spouse worked non-stop to pay for the family residence and contribute to RRSPs;
  
• partition would impoverish a spouse who is already destitute.

However, note that the goal in applying for an unequal partition cannot be to “get around” the law. Even if you believe the law to be unfair, you must demonstrate very serious grounds before a court will grant you an exemption from the rule of equal partition.

I have just discovered that my spouse cashed in all of his RRSPs six months before filing for divorce. What can I do?

In these situations you can apply for a “compensatory payment,” which is intended to protect unsuspecting spouses from being penalized when the other spouse prepared, to a certain extent, for the separation.

However, the date at which the property was sold, given away, withdrawn, or transferred must be determined. It is not necessary to prove that the other spouse was in bad faith if it occurred within the year preceding the relationship's demise or the filing of proceedings. You must prove that your spouse intended to reduce your share, however, where it occurred more than a year before.

The court is not obliged to order compensation: it all depends on the circumstances, including what the sold, donated, withdrawn, or transferred property was used for.

Can my spouse and I renounce partitioning the family patrimony?

Yes, but you must do so in the manner prescribed by law:

• by notarial act as of the demise, separation from bed and board, divorce, annulment of marriage, or dissolution or annulment of the civil union;
  
• in proceedings for separation from bed and board, divorce, annulment of marriage, or dissolution or annulment of a civil union, the spouses must sign an agreement to this effect (a judicial declaration) that must be recognized and ratified by the court.

In addition, such a renunciation must be registered in the “Register of personal and movable rights” within one year, in order to protect the rights of the spouses’ creditors.

It is therefore possible to sign an agreement during proceedings for separation from bed and board, divorce, annulment of marriage, or dissolution or annulment of a civil union in which the spouses renounce their right to partition the family patrimony. To be valid, this agreement must be approved by a court, which will verify that it was entered into freely and willingly. The agreement must be registered in the Register of personal and movable rights once it has received the court’s approval.

I regret having renounced the partition of the family patrimony. Can I have this renunciation cancelled?

A renunciation by notarial act may be cancelled by a court. The court will verify, among other things, whether the spouse fully understood what he was signing, if he was truly capable of consenting, if the other spouse honestly provided all the information necessary to make an informed decision, and whether there is a significant inequality in the value of property held by each spouse as a result of the renunciation.

Sometimes a partition is actually a renunciation in disguise; the document will mention partition, but in reality there was no partition. For example, an agreement entitled “Agreement to partition family patrimony” states that the spouses preserve their earnings in their respective pension plans. However, only one of them has such earnings (worth a considerable amount) because the other spouse never contributed to any pension plan. What appears to be a partition is in fact a renunciation of a share in the rights of one of the spouses. The court could cancel this agreement.

However, a renunciation of partition should not be confused with the exclusion agreement the spouses may have signed before December 31, 1990 (mentioned at the beginning of this Infosheet). Unfortunately, it became apparent that at the time many exculsion agreements were signed under pressure and even threats. These agreements may also be cancelled and they quite often are. This would be the case, for example, where the spouse proves that she did not possess the information needed to make an enlightened decision or that she was threatened or misled into signing.

Is it true that marriage contracts are no longer useful because of the provisions on family patrimony?

Absolutely not. The provisions governing the spouses’ matrimonial or civil union regime will apply to any property that is excluded from the family patrimony. Couples who married without a marriage contract after July 1, 1970 are subject to the matrimonial regime of partnership of acquests (see the Infosheet entitled Partnership of acquests  (http://www.educaloi.qc.ca/en/loi/married_spouses/148/)).

The same principle applies to people who contracted a civil union anytime after June 24, 2002, without signing an agreement to enter a different civil union regime. The property excluded from their family patrimony will be divided according to the rules of partnership of acquests.

Where people have entered a marriage or civil union contract, the rules specific to the regime chosen by the spouses will be applied. Most of the time the marriage or civil union contract establishes the regime of separation as to property but contains gifts made to one spouse. With the exception of gifts of furniture, as this is property that falls within the family patrimony, a spouse who benefits from gifts prescribed under a marriage or civil union contract can claim these gifts.

Still, depending on the results partition may have, the court may declare these gifts to be “null and void”, thus inoperative. For example, the court may decide not to enforce the payment of gifts where almost all of the spouses’ property is part of the family patrimony and will be partitioned because this would unjustly benefit one spouse at the expense of the other. Remember that the law’s intention is to promote economic equality of the spouses.