Property Exclusions – Gifts & Inheritances: Cartier v. Cartier

The key issue that needed to be resolved by Justice Ducharme in the case of Cartier v. Cartier, was whether a spouse who receives a gift from a third party during his or her marriage and then transfers the said gift into the joint names of both spouses, is entitled to exclude one-half the value of the property from his or her net family property? The judge in this case ultimately came to the conclusion that the answer to this question is “yes”.

In 1997, the Husband’s mother in this case gifted an entire farm property, including the Matrimonial Home, to the Husband by way of deed. In 2004, as part of a deal to sell the farmland to a developer, the Husband transferred ownership in the Home from his name alone to his and his spouse’s name as joint tenants. Of course, the Matrimonial Home is not excluded or excludable property under the Family Law Act, and so the parties in this case, agreed to an equal half interest in the Home for equalization purposes. The sale price agreed upon by the Cartiers for the remainder of the farmland was over $1million. As part of the Agreement, the developer, in turn, agreed to give back to the parties in their joint names some monies for a first and second mortgage. The Husband and Wife then decided to purchase with this money three GICs in their joint names. Some of the money was also loaned to a Mr. Brad Mason, pursuant to a promissory note. Mr. Mason signed a promissory note to repay the parties in full for the money he had borrowed, plus 7% interest per annum until the loan was paid off. Thus, the joint investment account, the first and second mortgages, and the promissory note were all made possible from and were directly traceable to the proceeds of the sale of the farm that had been gifted to the Husband by his mother.

At the time of separation, after calculating each respective spouse’s net family property, the wife was ordered to make an equalization payment to the husband of $118,443.75, as the Husband was entitled by the judge to exclude one half the value of gifted properties from the computation of his net family property. The Husband lost his exclusion only to the extent of the one-half interest given to his Wife. The Wife attempted to argue that she did not receive a half interest in the four jointly held properties in question, but instead, that she and her Husband each owned 100% of the asset in question. She further argued that one must first prove that he or she OWNS the property attempting to be excluded, before seeking to exclude it from his/her net family property. In making this argument, the Wife claimed that she and her Husband, in effect, had an undefined, indivisible 100% ownership in each of the properties, and thus, her Husband did not OWN the properties in question, and thus, he could not exclude the properties from his net family property. The Husband, however, argued that by putting the properties in the couples’ joint names, he intended to ensure that he and his Wife would share the value of the assets 50/50. The judge had “no hesitation” in finding that the Husband was the more credible and reliable witness.

The judge in Cartier went on to analyze and then ultimately distinguish some of the case law which stands for the proposition that property otherwise excluded under the Family Law Act, may not be deducted in the computation of one’s net family property where a spouse used or intended to use the gift or inheritance for the common purpose of the family. The judge concluded that the case law analyzed was different from the case at bar because unlike in the cases analyzed by the judge, the issues of resulting and constructive trust were not even pleaded in Cartier. Further, unlike in the analyzed cases, the Husband in Cartier did not seek to rebut the presumption of joint ownership.

At the end of the day, the judge in Cartier ultimately concluded that when a spouse transfers gifted or inherited property into spouses’ joint names, the transferring spouse loses the exclusion ONLY to the extent of the gift he or she made to the other spouse, provided that the result intended by the transferor was one of joint ownership.

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