Family patrimony: important concepts

General concepts

The rules on family patrimony were introduced into the Civil Code of Québec (C.C.Q.) more than 30 years ago. The law that introduced these rules bears a title that sums up quite well the legislator’s objective: Act to Amend the Civil Code of Québec and Other Legislation in Order to Favour Economic Equality Between Spouses. The new rules aimed to rebalance the assets/property of married couples at the time of separation.

It is important to note that the family patrimony provisions set out in art. 414 to 426 C.C.Q. are rules of public order: spouses may not avoid or waive the application of the family patrimony rules by marriage contract or otherwise. Moreover, regardless of the matrimonial regime chosen by the parties, whether it is the regime of separation of property or the regime of partnership of acquests, the rules on family patrimony always take precedence.

Article 414 C.C.Q. states that “[m]arriage entails the establishment of a family patrimony consisting of certain property of the spouses regardless of which of them holds a right of ownership in that property.” This text sheds light on two elements.

The first element is that family patrimony applies to married couples. It should be noted at the outset that family patrimony also applies to civil union couples since the introduction of civil union in the Civil Code of Québec in 2002. However, in specifying that these provisions apply to married and civil union couples, the legislator did not intend to subject common-law couples to the rules on family patrimony.

The second element is that family patrimony consists of property owned by either spouse. This means that ownership of property, generally, is necessary for its inclusion in the family patrimony. For example, a rented car, even if used for family travel, is not part of the family patrimony.

Property included in the family patrimony

The family patrimony includes four categories of property, which are expressly listed in art. 415 C.C.Q.:

1. The residences of the family or the rights which confer use of them

To be included in the family patrimony, a residence must be used by the family. This category includes the principal residence as well as all secondary residences of the family. The classic example is a cottage used by the family during the summer or on weekends.

As for the rights which confer use of a residence, the Civil Code of Québec refers to various situations that confer these rights. For example, a residence used by the family may be in the name of a corporation or a trust held by one of the spouses.

2. The movable property with which the residences are furnished or decorated and which serves for the use of the household

This category includes all the furnishings in the family home and secondary residences which serve for the use of the household. It is therefore not necessary for the whole family to use the furnishings, but they must serve for the use of the household. However, any movable property that is for the exclusive use of a spouse, such as work tools, is excluded from the family patrimony.

3. The motor vehicles used for family travel

The definition of a motor vehicle is broad and includes much more than the cars used for family transportation. For example, according to case law, a trailer, motorbike or boat can be considered a motor vehicle if it is used for family travel. This is essentially a question of fact where the concept of the vehicle ‘’being used for family travel’’ is key.

4. Retirement plans

This category includes money/benefits accumulated during the marriage under a pension plan, retirement savings plans and earnings registered in the name of each spouse with the Régie des rentes du Québec or other similar plans.

It is important to note that certain assets of the family patrimony are included regardless of the acquisition date. This applies to the family’s residences, movable property that furnishes or decorates these residences and that is used by the family, as well as motor vehicles used for family travel. For example, the house that one of the spouses owned before the marriage (or civil union) and that becomes the family home during the marriage (or civil union) will be included in the family patrimony.

However, other property, such as the benefits accrued under a pension plan, is part of the family patrimony if it was acquired during the marriage or civil union.

Property excluded from the family patrimony

Essentially, property that is not expressly listed under the C.C.Q. as being part of the patrimony will be excluded from it. Therefore, the following property will not be considered part of the family patrimony:

• A spouse’s business or trade;
• The bank accounts;
• Savings bonds, treasury bonds, shares and other investments;
• Income properties not used by the family.

Article 415 C.C.Q. expressly excludes three types of property from the family patrimony:

1. The registered earnings of each spouse pursuant to the Act respecting the Québec Pension Plan or to similar plans when the dissolution of the marriage results from death;

2. Benefits accrued under a pension plan that grants the surviving spouse the right to death benefits when the dissolution of the marriage results from death;

3. Property devolved to one of the spouses by succession or gift before or during the marriage.

It should be noted that property that is not part of the family patrimony will be divided according to the rules of the matrimonial or civil union regime chosen by the spouses.

Partition of the family patrimony between the spouses

Article 416 C.C.Q., paragraph 1, provides that:

“In the event of separation from bed and board, or the dissolution or nullity of a marriage, the value of the family patrimony of the spouses, after deducting the debts contracted for the acquisition, improvement, maintenance or preservation of the property composing it, is equally divided between the spouses or between the surviving spouse and the heirs, as the case may be.”

This article specifies the situations that may lead to the partition of the family patrimony, namely separation from bed and board, dissolution of marriage by the death of a spouse, divorce or nullity of marriage.

Where the marriage ends on a death, the liquidator must first partition the family patrimony before liquidating the succession.

This provision also states that the family patrimony must be equally divided between the spouses, after certain debts are subtracted to determine the property’s net value. To set out the net value, the first step is to determine the property’s market value as of the date of institution of proceedings for divorce, legal separation or nullity of marriage or on the date of death, as the case may be. The second step involves deducting from the market value the debts related to the property as of the date of institution of proceedings for divorce, legal separation or nullity of marriage or on the date of death of one of the spouses (for example, the balance of the mortgage loan or home equity line of credit on the family home).

The third step is to determine the partitionable value of the property, i.e., the value that will be shared on an equal basis between the spouses. The partitionable value may be the net value divided equally or the net value from which certain deductions will be subtracted before being shared equally between the spouses.

It is the value of the property that makes up the family patrimony that will be divided between the spouses, not the property or ownership of that property. As a practical matter, the spouse with the higher partitionable value in the family patrimony will have to pay the spouse with the lower partitionable value. Payment may be made in cash or by transferring the ownership of property.

In the event of disagreement, a judge will decide the partitionable value of the family patrimony. When the spouses are in agreement, they may divide up the value of the property in different ways and without necessarily dividing it equally between them. This agreement must be ratified by a judge, but the spouses still have a great deal of latitude to decide the partitioning.

If payment of the entire sum could cause prejudice to the spouse who must pay, the court may order the payment of instalments spread over a period of not more than 10 years.

Deductions in calculating the partitionable value

Once the net partitionable value has been determined, the deductions listed in art. 418 C.C.Q. must be subtracted from this value before dividing it equally between the spouses. These deductions in favour of one of the spouses may be grouped into three categories:

1. Deduction of the net value, at the time of the marriage, of the property then owned by one of the spouses that is included in the family patrimony, as well as its increase in value during the marriage

For example, the residence owned before marriage by one of the spouses will be included in the family patrimony. However, to ensure a fair partitioning, it will be possible to make a deduction in favour of the owning spouse for the net value he or she accumulated on the residence before the date of the marriage, as well as for the proportional increase in value of this property during the marriage.

2. Deduction of the net value of a contribution made by one of the spouses during the marriage, where the contribution was made out of property devolved by succession or gift, as well as its increase in value

For example, a spouse receives an inheritance of $20,000.00 during the marriage. The spouse invests this amount in the addition of a garage to the main residence. At the time of the divorce, this $20,000.00, as well as the increase in value of the garage from its construction up to the date of the divorce proceedings, must be subtracted from the net value of the family residence.

3. Deduction for the reinvestment during the marriage of property included in the family patrimony that was owned by one of the spouses at the time of the marriage

This applies when, before marriage, one of the spouses owned property that was part of the family patrimony, for example a house fully paid off that became the couple/family’s residence. During the marriage, the owner spouse sells the house and buys a cottage with the proceeds of the sale. At the time of the divorce, this monetary contribution, as well as the increase in value of the cottage up to the date of the divorce proceedings, must be subtracted from the net partitionable value of the cottage.

Exception to the partition into equal shares

In certain special circumstances, a party may petition the court for an unequal partitioning of the family patrimony under art. 422 C.C.Q. when a partition into equal shares would result in an injustice, in particular because of the brevity of the marriage, the waste of certain property or the bad faith of one of the spouses. A spouse who applies to the court for an unequal partitioning must prove this injustice as well as the conduct alleged against the other spouse.

Compensatory payment

To promote a fair partitioning of the family patrimony and to prevent spouses from trying to escape partition by wasting or alienating certain property, the legislator introduced the concept of compensatory payment in art. 421 C.C.Q.

Thus, an aggrieved spouse may apply to the court for a compensatory payment when property has been wasted or alienated in the year preceding the date of the institution of divorce proceedings. The same rule applies where the alienation occurred over one year before and it is proven that it was made for the purpose of decreasing the share of a spouse in the partitioning of the family patrimony.

In closing, it should be noted that the family patrimony rules apply together with the rules of the matrimonial regime of the spouses (partnership of acquests or separation as to property).

In addition to the emotional stress, a divorce is likely to have very significant financial consequences for the spouses, or at least one of them, when there is a large disparity in the value of each spouse’s patrimony.

This being said, the rules and calculations of patrimony are complex and subject to various interpretations. It is therefore important to consult a lawyer or a specialist in family law to clarify and determine the rights of each spouse.