The pandemic could affect when and how clients divorce

Grant Gold, a partner at Ricketts Harris LLP in Toronto, expects an uptick in people looking for divorce or separation advice as the crisis eases. “After things open up a little bit and people have some privacy, I think you’re going to see us getting busier,” he says.

Typically, business is booming for family lawyers after New Year’s, Gold says — after couples have spent significant time together. “I think you’re going to see that kind of a surge,” he says, with clients seeking an initial legal consultation, at minimum. Since Ontario started to reopen its economy, he’s received such calls from clients.

Jacqueline Peeters, a partner at Cohen Alves Peeters Yates LLP in Toronto, says her business volume is unpredictable from year to year.

She experienced a pause in business in March as the economy shut down and clients with whom she was already working temporarily stopped pursuing their cases. After a few weeks passed, clients started coming back, ready to move forward, she says.

She doesn’t foresee a potential uptick in divorce resulting from the pandemic, saying that challenging times can not only push people apart, but also bring them closer.

Valuation date

Whether the divorce rate increases or not, understanding some of the factors that affect property division can help you serve clients better.

Property division is regulated provincially — in Ontario, by the Family Law Act.

Asset division is affected by the valuation date, which the act defines as the date at which the spouses separate with no reasonable chance of resuming cohabitation. (Not all provinces use the separation date when dividing assets.)

The date when the spouses separate is sometimes clear, Peeters says, such as when spouses tell their children about the separation or announce to family that they won’t be attending a party because of the separation.

Other times, “it’s hotly disputed,” even by years, she says, which can happen if spouses remain in the same home, for example.

Ample case law addresses the issue. To assess whether a couple is separated, one thing courts consider is physical separation. “It’s not necessarily the test, but it’s a test,” Gold says. Within the same home, physical separation may be demonstrated by having separate bedrooms.

Other factors include whether the couple presents socially as a couple to friends, family and children; discusses family issues together; or is considered to be married when filing taxes. “All of those things are factors that a court will look at,” Gold says.

He recalls a case in which his client claimed a years-earlier separation date than the other spouse did. However, evidence of ongoing Sunday family meals and annual family Christmas photos worked against him.

“It’s important when you’re the one who wants to trigger that separation date that you do it as formally as you can,” Gold says — for example, using a letter from a lawyer.

Trigger warnings

A divorcing spouse may want to proactively trigger a separation date so that it’s timed with financial events, such as getting laid off or getting hired at another income level, or asset depreciation/appreciation.

For example, if one spouse holds shares that significantly drop in value, having a separation date that precedes a potential rebound in the shares’ value would mean that spouse alone benefits from the increase.

“In Ontario, any gains after the valuation date go to the title-holding spouse,” Gold says. (The same would go for losses.) Thus, if one spouse owns an asset and has been considering separation, they may want to make their decision when the market is depressed, as opposed to at highs, he says.

(In accordance with Ontario’s Family Law Act, spouses keep the value of property they bring into a marriage, with an exception being a matrimonial home, the value of which is shared equally regardless of title. Also, the act exempts certain assets from property division.)

A change in the value of assets after the separation date must be extreme to make an exception to property equalization.

In Serra v Serra (2009), the Ontario Court of Appeal stated that an unequal division of property would be justified only where an equal division would “shock the conscience of the court” — a high threshold.

The case involved a divorcing couple: one spouse carried on a profitable textile business that experienced a significant drop in value between the couple’s separation and trial dates (the textile industry collapsed). The Appeal Court ultimately reduced the equalization payment the spouse was required to pay based on several factors.

The Serra decision may apply in a future case if a business faces drastic financial circumstances, Peeters says. Losing 20% of the value of a portfolio in a bear market doesn’t compare.

Gold also notes that, for divorcing spouses in Ontario, property must be dealt with within six years of the valuation date or two years after divorce, whichever date is sooner. (All provinces have a limitation period for sharing in the value of property). Thus, litigators will aim to schedule a separation date as early as possible, and to start litigation within six years if a case hasn’t settled, Gold says.

However, most family law cases settle, he says.

A smoother settlement

Nothing prevents spouses from setting their own separation date for practical purposes — perhaps reflecting when they stopped contributing to their joint accounts, Peeters says.

Her practice is settlement focused, sometimes via the process of collaboration, meaning spouses each retain counsel and agree to resolve the matter without going to trial.

Current clients have decided to wait until September to equalize their RRSPs, with the reasoning that markets may be calmer by then.

When clients work co-operatively with a trusted family advisor, the advisor can help them decide the timing of splitting invested assets, Peeters says.

The advisor can also help clients address personal issues such as an age or skill gap between spouses. “The kind of assets that might make sense for one person to hold versus the other can be different,” she says.