Family Cottage: How can trusts protect heirs from matrimonial claims?

  • April 05, 2021
  • Harjot Atwal

              “Marriage is the agreement to let a family happen.”

Yet, what happens when the marriage becomes undone? Would the reverse of this quote of Betty Jane Wylie be: divorce is the process that prevents family from happening?

When it comes to a family cottage, particularly one that is co-owned by multiple heirs, matrimonial home claims of a divorcing spouse can certainly have this effect. According to the Family Law Act one can have multiple matrimonial homes, as long as each property is “ordinarily occupied by the person and his or her spouse as their family residence.”

There are several reasons why a divorcing spouse would seek a matrimonial home (MH) designation for the family cottage. For example, if gifted to the higher-income spouse during the marriage, they will want to exclude the cottage from their assets in order to lower their net family property and correlatively reduce any equalization payment that may become due on separation to the other spouse. Once the cottage is designated a MH, however, it can no longer be an excluded gift and the equalization payment on marriage breakdown increases.

While such a motivation would primarily impact just the divorcing spouses, a MH designation for a family cottage co-owned by multiple heirs is potentially problematic for everyone. This is due to the rights the Act grants to both spouses for a MH. Both have an equal right to possession, whereby one spouse cannot sell or even mortgage the property without the other spouse’s consent. It is not unthinkable that one spouse may unreasonably withhold their consent, due to bitter feelings of hostility or animosity towards their former life partner.