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Vancouver Discretionary Family Trust Division Lawyers deal with vested, contingent and discretionary trusts that often have millions of dollars of value “in” them. Vancouver Family Trust Division Lawyers understand that a some lawyers argue that trust is not so much an entity but is more a relationship. Vancouver Family Trust Division Lawyers who seek or oppose division of these trust interests must first value and then potentially divide this family property. The area is amongst the most complex areas of family property division law. Our top rated* Vancouver Discretionary Family Trust Division Lawyers know that the case law is still developing on a daily basis under the new Family Law Act. We have 6 offices in BC and Calgary located in Vancouver, Calgary, Surrey, Kelowna, Fort St John and Richmond.

Who Creates The Discretionary Trust Really Matters

Vancouver Discretionary Family Trust Division Lawyers know that trusts established by third parties create a number of difficulties in valuation and division. For an interesting valuation article on discretionary trusts in family breakdown proceedings click here.

Family trusts created by a spouse are far easier for Courts to deal with and are most likely going to be clawed back as 100% family property but as today’s case shows excluded property placed into a trust has its starting value excluded. There have been very few decisions on discretionary family trusts. In the recent case of M.V v. F.V  Madam Justice Dardi had little difficulty clawing back and dividing family property placed into trust by a husband after she went through the new Family Law Act provisions.

Vancouver  Discretionary Family Trust Division Lawyers

Madam Justice Dardi rejected the husband’s argument that the property that he placed into the family trust was excluded and of shareable property, noting:

  • he created and was a trustee of the trust;
  • he was a discretionary beneficiary of the trust;
  • he had broad powers to add or remove beneficiaries from this trust;
  • he had broad powers to draw out income and capital from the trust and could transfer the property of the trust to himself alone.

The B.C. Trust

[59]         As noted, the central issue in this case is whether it is Mr. V.’s discretionary beneficial interest in the B.C. Trust, or the increase in the value of the principal trust asset, namely the Squamish Property, that constitutes family property.

[60]         Mr. V. and James Titerle, a lawyer, are the trustees of the B.C. Trust (the “Trustees”). Prior to submissions being heard, I directed that Mr. Titerle be served with notice of the proceedings. Counsel advised that he was served and that he would not be appearing.

[61]         Before turning to the analysis, I will review the key provisions of the B.C. Trust, set out the position of the parties, and then refer to the well-settled principles of statutory interpretation.

Trust Provisions

[62]         The F. V. Family Trust, referred to in these Reasons as the B.C. Trust, is a fully discretionary trust settled by Mr. V. on November 24, 2005. By way of the execution of a declaration of trust, Mr. V. transferred the Squamish Property to the B.C. Trust on the same day.

[63]         Pursuant to clause 1.1, Mr. V., his spouse and issue, and any person appointed by the Trustees as a beneficiary are discretionary beneficiaries of the B.C. Trust.

[64]         The Trustees have very broad powers, including the unfettered discretion to add or remove beneficiaries. Under clause 2.1(4), the Trustees are empowered to distribute any portion of the capital of the trust to or for the benefit of any one of the beneficiaries.

Key Sections Explained By Vancouver Discretionary Family Trust Division Lawyers

[83]         The FLA refers to trust interests in four provisions: ss. 85(1)(f), 85(1)(e), 84(3) and 84(2)(f).

    (i)          Subsection 85(1)(f): Under this provision, a spouse’s beneficial interest in property held in a discretionary trust where the spouse is not the settlor and did not make any contribution to the trust is excluded from family property. Notably, there is no statutory definition of what qualifies as a “discretionary trust”. The FLA does not specify whether such trusts must be purely discretionary or whether it applies to trusts with both discretionary and fixed interests.

   (ii)          Subsection 85(1)(e): Property that is considered to be excluded property, based on the criteria in ss. 85(a) to (d), will remain excluded property even if it has been settled in a trust for the benefit of a spouse. By way of illustration, this provision would exclude property in a testamentary trust.

 (iii)          Subsection 84(3): Property contributed to a trust by a spouse where the spouse has a vested interest or where the spouse has the power to distribute the property to himself or herself or has the power to terminate the trust and thereby cause the property to be returned to the spouse, is deemed to be family property.

 (iv)          Section 84(2)(f): If s. 84(3) does not apply, property that a spouse disposes of after the spousal relationship began (such as settling the property upon a trust) and where the spouse retains authority alone or with another party over the trust property to require its return or to direct its use or further disposition in any way, is deemed family property.

[84]         The above categories are not exhaustive as other trust interests may be captured under s. 84(1)(a)(ii).

[98]         Applying a purposive interpretation, I conclude that it was the intention of the Legislature to discourage such transactions and recapture potential family property that was disposed of by one spouse prior to separation. This is not a novel concept in matrimonial law in this province. Notably, under the Family Relations Act, R.S.B.C. 1996, c. 128 [FRA] the concept of tracing or a compensation order was employed by the courts to rectify the disposal or a conversion of a potential family asset prior to trial: Billingsley v. Billingsley (1991), 36 R.F.L. (3d) 188 at paras. 10-17 (B.C.C.A.).

New Act Objectives To Be Furthered Say Vancouver Discretionary Family Trust Division Lawyers 

[99]         It is also a paramount principle of statutory interpretation that a legislative provision should be construed in a way that best furthers its objects. One of the objectives endorsed by the FLA is the imposition of a new property regime that simplifies property disputes and imposes more limited circumstances in which judicial discretion can be exercised, thereby enhancing clarity and predictability of outcomes: V.J.F. at para. 5. The application of the plain meaning of s. 84(2)(f) leaves little room for judicial discretion in identifying what constitutes family property.

[100]     In summary, after considering the grammatical and ordinary sense of ss. 84 and 85 in harmony with the overall scheme of the FLA, I conclude that the interpretation advanced by Mr. V. cannot prevail. Section 84(2)(f) is the operative provision in this case. Subject to the deductions I will address in the next section of my Reasons, I conclude that the amount by which the value of the Squamish Property has increased since the date the spousal relationship began, June 1, 2002, constitutes family property.

If you or your spouse created a trust or is a beneficiary of the trust you need legal guidance early on to get help with what some Vancouver Discretionary Family Trust Division Lawyers refer to as the Gordian Knot of family property division. Call us toll free at 1-877-602-9900.

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