Ten (10) years ago, shoe mogul Steve Madden married long-time friend and
employee Wendy Ballew. At the time, Madden was serving a 31-month prison
sentence for securities fraud and stock manipulation. His involvement
with brokerage firm Stratton Oakmont was depicted in the Oscar-nominated
movie, The Wolf of Wall Street.
Ballew was Steve Madden’s Director of Operations and she would regularly
visit him in jail for business meetings. There, the two fell in love and
got married. Now, the couple have three young children together. InTouch
Weekly reports that the couple are ending their relationship on good terms.
If Madden and Ballew lived in Ontario, the
Family Law Act would govern how the parties should
divide their property. In Ontario, the division of property is addressed through the sharing
of value of the property owned by married spouses. The objective of such
a regime is to ensure that each spouse will share equally in the economic
wealth of the marriage at its breakdown, without any change in property
ownership.
Pursuant to section 5(1), upon the breakdown of the marriage, the spouse
whose net family property is the lesser of the two net family properties
is entitled to one-half the difference between them. Net family property
is defined in section 4 of the
Family Law Act as:
The value of all the property, except property described in subsection
(2), that a spouse owns on the valuation date, after deducting,
(a) The spouse’s debts and other liabilities, and
(b) The value of property, other than a matrimonial home, that the spouse
owned on the date of the marriage, after deducting the spouse’s debts
and other liabilities, other than debts or liabilities related directly
to the acquisition or significant improvement of a matrimonial home, calculated
as of the date of the marriage.
The payment from one spouse to the other is referred to as an
equalization payment and is equal to one-half the difference between the spouses’ net family
properties as defined above.
To satisfy the equalization payment, the parties may agree to one or more of the following methods:
- Pay the equalization amount in one or more lump sum installments;
- Sell properties and divide the proceeds of sale;
- Transfer legal title of an asset from the paying spouse to the recipient spouse;
- Hold a property in trust for the recipient spouse for a number of years;
- Transfer money from the paying spouse’s pension plan, Registered Retirement
Savings Plan (RRSP) or Registered Retirement Income Fund (RRIF) to an
account owned by the recipient spouse.
In Madden’s case, he is most likely the spouse with a higher net family
property and, as such, must make an equalization payment to Ms. Ballew.
However, prior to making an equalization payment to his wife, both parties
must consider the contingent tax consequences that flow from property
transfers. Ms. Ballew should also ensure that Madden has provided full
and accurate financial disclosure prior to agreeing to the quantum of
the equalization payment owed by Madden.