Issue
Conclusion
Under the defintion in s. 4 of the Family Law Act, “property” means any interest, present or future, vested or contingent, in real or personal property and includes, property over which a spouse has, alone or in conjunction with another person, a power of appointment exercisable in favour of himself or herself. (Family Law Act)
The discretionary family trust is under the absolute discretionary control of trustees. (Boris v. Boris)
The definition of “property” in the Family Law Act is broad, and includes any property over which a spouse has, alone or in conjunction with another person, a power of appointment exercisable in favour of himself or herself. The court will not exclude assets from the net family property calculations when the applicant maintains exclusive control over the asset. (Makeeva v. Makeev)
The central question with respect to determining the proprietary character of the discretionary interest in the trust is the interest holder's ability to control whether distributions of trust property are made to him for his benefit. His having meaningful control in that regard would undermine the separation as between the entities. (Tremblay v Tremblay)
In Lampron v. Lampron, the amounts placed by the applicant in investments described as being held in trust for the children and over which he maintained exclusive control were to be included in the assets owned by the applicant on the date of marriage, as he had exclusive control over the funds and no evidence was called to show that the trust was irrevocable.
In T.P.S. v. K.E.S., Aitken J. excluded from the NFP calculations the RESP accounts under the parties' control, as those funds were being held in trust for their children.
In Mudronja v. Mudronja, the husband had the power of appointment granted to him by the trust settlement. He and he alone had power that could be exercised in favour of the existing beneficiaries, and/or other persons or entities of his choosing, including himself. As the husband not only had the power to appoint himself a beneficiary and at his discretion distribute the trust assets solely to himself, he also had an unlimited and discretionary power to dispose of the trust assets in any manner he deemed suitable. In those circumstances, the value of the husband's power of appointment in the family trust was properly included as property owned on valuation date, as defined in s. 4(1) of the FLA.
Law
Under the defintion in s. 4 of the Family Law Act, RSO 1990, c F.3, “property” means any interest, present or future, vested or contingent, in real or personal property and includes, property over which a spouse has, alone or in conjunction with another person, a power of appointment exercisable in favour of himself or herself:
Definitions
4 (1) In this Part,
[...]
“property” means any interest, present or future, vested or contingent, in real or personal property and includes,
(a) property over which a spouse has, alone or in conjunction with another person, a power of appointment exercisable in favour of himself or herself,
(b) property disposed of by a spouse but over which the spouse has, alone or in conjunction with another person, a power to revoke the disposition or a power to consume or dispose of the property, and
(c) in the case of a spouse’s rights under a pension plan, the imputed value, for family law purposes, of the spouse’s interest in the plan, as determined in accordance with section 10.1, for the period beginning with the date of the marriage and ending on the valuation date; (“bien”)
In Makeeva v. Makeev, 2019 ONSC 4334 (CanLII), appeal dismissed, cross-appeal on the issue of matrimonal home allowed, 2021 ONCA 232 (CanLII), appeal dismissed, 2021 CanLII 109585 (SCC), Tzimas J. held that the definition of “property” in the Family Law Act is broad, and includes any property over which a spouse has, alone or in conjunction with another person, a power of appointment exercisable in favour of himself or herself. The court will not exclude assets from the net family property calculations when the applicant maintains exclusive control over the asset:
[136] The definition of “property” in the Family Law Act is broad, and includes any “property over which a spouse has, alone or in conjunction with another person, a power of appointment exercisable in favour of himself or herself”: s. 4(2)(a). Thus, in Lampron v. Lampron, 2004 CanLII 28090 (Ont. S.C.), at para. 5, aff’d (2005), 2005 CanLII 788 (ON CA), 12 R.F.L. (6th) 391 (Ont. C.A.), where the parties claimed to hold investments in trust for their children, the court declined to exclude those assets from the net family property calculations on the basis that the applicant maintained exclusive control over those funds, there was no proof brought to show that the trust was irrevocable, and the investments were listed in the parties’ names. See also Harrington v. Harrington, 2009 ONCA 39, 63 R.F.L. (6th) 264, at paras. 6, 40, where the respondent sought to exclude a joint account on the basis that it was an implied trust for his father’s benefit. The Court of Appeal noted that the respondent was entitled to use the income generated on the account for himself and he declared it on his tax returns in concluding that this was property over which he had a “power of appointment” exercisable in his favour. It was therefore included in his net family property.
In Boris v. Boris, 2005 CanLII 6386 (ON SC), Scime J. explained that the discretionary family trust is under the absolute discretionary control of trustees:
[28] The discretionary Family Trust is under the absolute discretionary control of trustees, among whom the directing mind appears to be Owen Boris.
In T.P.S. v. K.E.S., 2007 CanLII 1900 (ON SC), Aitken J. excluded from the NFP calculations the RESP accounts under the parties' control, as those funds were being held in trust for their children:
[117] Both parties included the RESP accounts under their control in their respective net family properties. Those funds are being held in trust for their children. I have deleted them from the parties’ net family properties. Each party shall hold the fund under his or her control in trust for the children in accordance with the terms of the plan. The evidence was that as of the valuation date, there was $7,454.53 in the fund under Mr. T.P.S.’s control and $8,153.76 in the fund under Ms. K.E.S.’s control.
In Tremblay v Tremblay, 2016 ONSC 588 (CanLII), Philips J. held that the central question with respect to determining the proprietary character of the discretionary interest in the trust is the interest holder's ability to control whether distributions of trust property are made to him for his benefit:
[31] In my view, the central question with respect to determining the proprietary character of the Respondent’s discretionary interest in the Jeff Tremblay Family Trust No.2 is his ability to control whether distributions of trust property are made to him for his benefit. His having meaningful control in that regard would undermine the separation as between the entities.
In Mudronja v. Mudronja, 2014 ONSC 6217 (CanLII), appeal dismissed, cross-appeal allowed on the issue of child support, 2020 ONCA 569 (CanLII), the husband had the power of appointment granted to him by the trust settlement. He and he alone had power that could be exercised in favour of the existing beneficiaries, and/or other persons or entities of his choosing, including himself. As the husband not only had the power to appoint himself a beneficiary and at his discretion distribute the trust assets solely to himself, he also had an unlimited and discretionary power to dispose of the trust assets in any manner he deemed suitable. In those circumstances, the value of the husband's power of appointment in the family trust was properly included as property owned on valuation date, as defined in s. 4(1) of the FLA:
[89] The more pointed issue in the circumstances of this case is the valuation of Mr. Mudronja’s power of appointment granted to him by the trust settlement. Pursuant to s. 4(1) of the FLA, “property” for purposes of the equalization process is defined as any interest, present or future, vested or contingent in real or personal property and includes “property over which a spouse has alone or in conjunction with another person, a power of appointment exercisable in favour of himself or herself.” This Court has the task of determining the fair value of Mr. Mudronja’s unfettered discretionary power of appointment conferred on him pursuant to the terms of the Trust. On V-day he and he alone had power that could be exercised in favour of the existing beneficiaries, and/or other persons or entities of his choosing, including himself.
[90] On V-Day Mr. Mudronja not only had the power to appoint himself a beneficiary and at his discretion distribute the trust assets solely to himself, he also had, and continues to have, an unlimited and discretionary power to dispose of the trust assets in any manner he deems suitable. According to the settlement document the trustee’s powers, as detailed in a Schedule attached to the Settlement, include the power
to sell, transfer, assign, exchange, convey, mortgage, lease or otherwise dispose of any of the Assets from time to time constituting the Trust Fund in any manner the Trustee deems proper and at a price, upon such terms and for such consideration as the Trustee deems suitable; to give any option with respect to any property in the Trust Fund and generally perform all acts of alienation and ownership with respect to the Trust Fund to the same extent and with the same effect as if the trustee was the absolute owner of the Trust Fund.”
In those circumstances I find the value of Mr. Mudronja’s power of appointment in the Mudronja family trust, the assets of which are the Class A non-voting common shares of Jitsu, is properly included as property owned by Mr. Mudronja on V-Day, as defined in s. 4(1) of the FLA.
In Lampron v. Lampron, 2004 CanLII 28090 (ON SC), the amounts placed by the applicant in investments described as being held in trust for the children and over which he maintained exclusive control were to be included in the assets owned by the applicant on the date of marriage, as he had exclusive control over the funds and no evidence was called to show that the trust was irrevocable:
[3] My Reasons for Decision are clear that I intended to include all the assets held in both parties names, including the amounts placed by each party in investments described as being held in trust for the children and over which each party maintained exclusive control.
[4] I have given both parties the opportunity to make further submissions before correcting my decision dated December 16, 2003, and the parties have done so and also made additional submissions on several other issues.
[5] The assets held in the name of the Applicant in trust for the children should be included in the assets owned by the Applicant on the date of marriage, as he had exclusive control over the funds and no evidence was called to show that the trust was irrevocable. The Applicant held the sum of $48,119.68 in trust for Isabelle, the sum of $23,523.19 in trust for Paul and the sum of $29,320.52 in trust for Élie, for a total of $100,963.39. The value of these investments on March 31, 2003, were reduced to $85,057.17 due to the decline in the stock market values.
[6] Due to the Applicant’s claim of hardship, I am prepared to allow the reduced amount of $85,057.17 to be included in the Applicant’s net family property, as of the date of separation, in addition to the amount previously indicated in my reasons.