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What is your degree worth when it comes to division of assets?
For most people undergoing separation, identifying and valuating assets and debts might seem fairly straightforward. In the context of Family Law, these tasks are not so simple – particularly when you are faced with a non-traditional, and therefore controversial, source of value.
I’m Nick Slinko with the Feldstein Family Law Group. Today, I’ll be giving you some highlights of how family courts value a professional degree or designation earned by you or your spouse. Is this degree a piece of property? If so, should it be part of your Net Family Property calculation? If so, this would allow your spouse to claim an interest in it when the marital assets are being divided?
To give you some relevant context, I will re-visit the facts of the leading case on this issue: Caratun v. Caratun, which is a decision of the Ontario Court of Appeal. In this case, Mr. Caratun married Mrs. Caratun primarily to allow him to immigrate to Canada and subsequently obtain a dental degree so that he could practise here. Mrs. Caratun, presumably, entered the marriage out of love for her husband, and believed that the marriage would be successful. Just two days after obtaining his dental degree, Mr. Caratun separated from his wife. During the course of the relationship, Mrs. Caratun had given up various opportunities to advance her own career in order to earn a steady income to put her husband through dental school, despite the fact that on the surface, she stood to gain nothing directly, insofar as Mr. Caratun’s dental degree was concerned.
After separation, Mrs. Caratun was increasingly worried about her financial situation. She, in turn, sought to put a value on the degree, which she contributed to both tangibly and intangibly during the parties’ marriage. Mrs. Caratun wanted this degree to have a value for the purposes of the Equalization of Net Family Property, which is the equalizing of the net growth that each spouse experienced during the marriage in terms of assets. This would have provided Mrs. Caratun with a lump sum payment with which to start her new single life.
The Ontario Court of Appeal ruled that this degree was not considered property, or an asset, for the purposes of equalizing the parties’ respective Net Family Properties. This is an interesting ruling in my opinion, and one that might seem unfair to a lot of people because of the consequence: Mrs. Caratun receives none of the benefit of this degree, despite her contributions to her former husband’s ability to obtain same. This result would be highly irregular if the Court were ruling on a more tangible asset that Mrs. Caratun contributed to, such as a family cottage or a rental property.
The Court had difficulty with describing a degree as property for a variety of reasons. There was concern about characterizing a professional degree or license as property, as they really produce nothing other than the ability by the person holding the degree or license to work in a given field. It would be difficult to then distinguish why a professional degree or license was treated as property. If this were the case, a person in a different field could earn a similar income after a similar amount of training and this would not have proprietary rights attributed to it. Essentially, the Judges worried that this would lead to every job being classified as property.
The Judges also highlighted some concerns that a professional degree or license does not have many of the cornerstones of property. For example, a person cannot sell or transfer their degree or license. Also, they worried that a degree is really of no future value without the holder of it, and it would therefore be extremely difficult to quantify, if a value could even be assigned to it at all. This sort of speculation should be avoided as it may lead to inaccurate calculations and unjust equalization payments.
Instead, so as not to ignore Mrs. Caratun’s contributions to her husband’s attainment of the degree completely, the Court awarded spousal support to Mrs. Caratun on a compensatory basis, as opposed to a needs basis. To learn more about the specifics of spousal support, please visit our website. Spousal support, however, may not be a remedy that is available to everyone, and in those cases, it may not be fair to the spouse who put their partner through school to put no other value on a degree or license.
Other critics of this decision have stated that we value people’s businesses, when they are sole proprietors or shareholders, by looking at the “goodwill” of the company, or the value that this person brings to the business by virtue of their skills and attributes. How is this any different than placing a value on a degree or license earned by an individual? This is a valid point, and a question to consider.
Despite these concerns, the current state of the law is that a degree or license is not property, but that the economic fallout of a situation such as that experienced by the Caratuns is usually dealt with via spousal support award.
I’m Nick Slinko. Thanks for watching.