Does Interest in a Family Trust Count as Family Property?

The case Grosse v Grosse, 2015 SKCA 68 in the Court of Appeal for Saskatchewan concerns the division of family assets following a divorce. A central issue in this case was whether the husband’s interest in a trust constituted family property; if it was, then the court would also have to decide how to value and divide that interest.

Whether Interest in a Family Trust Count as Family Property

Mr. Grosse and his wife separated after 28 years of marriage. During the marriage, Mr. Grosse worked as a realtor and acquired a large number of income properties, which he and his wife managed together. Mr. Grosse formed a corporation to take ownership of and manage those properties.

Given the large sums involved, the Grosses decided to set up a family trust for estate planning and income tax purposes. Mr. Grosse’s brother was the settlor for the trust; Mr. Grosse was the trustee; and Mr. Grosse, his children and any future grandchildren were named as beneficiaries.

The accountant who coordinated this recommended that Ms. Grosse not be included as a beneficiary for tax reasons.

During the trial, Ms. Grosse argued that the definition of Family Property included his interest in the trust for the purposes of dividing family property.

The court of appeal overturned the lower court’s finding that Mr. Grosse’s interest in the Trust was not divisible as family property. From paragraphs 49-50:

“I find the trial judge in this case erred first in determining that the nature of Mr. Grosse’s interest in the Trust was only a contingent beneficial one. Subparagraphs (b) and (c) of the definition of “family property” also apply. They allow this Court to “pierce the veil” of the Trust and deem the Trust’s assets to be family property for division purposes. Second, he misinterpreted subparagraph (c) of the definition of “family property”. Pursuant to that subparagraph, the Growth Shares, which constitute the property “disposed of” by Mr. Grosse in favour of the Trust, are deemed family property for division purposes. Third, the inchoate contingent beneficial interests of the Grosses’ sons in the Trust do not render an equal division of the Trust property between Mr. and Mrs. Grosse for family property purposes either unfair or inequitable.

Ms. Grosse took the position that it is the Trust’s assets that should be divided. She did not argue that Mr. Grosse’s “contingent beneficial interest” in the Trust pursuant to subparagraph (a) had a value over and above the fair market value of those assets. Accordingly, I have not considered that potential issue.”

Family Trust Law in Canada

While this case took place in Saskatchewan, it reinforces the importance of retaining knowledgeable counsel in any case involving family trusts.

For information on family trusts in Ontario, I would recommend inquiring with a competent family trust lawyer in Kitchener. In my experience, the Kitchener-Waterloo region has the highest concentration of skilled legal professionals outside the Greater Toronto Area.

Andrew Carnegie and Industry – a Brief Analysis

Andrew Carnegie is one of the most well regarded billionaires in history. Known for his incredible philanthropy, Andrew donated almost 80% or more of his wealth to institutions like libraries, hospitals, and universities. Carnegie had the belief that the worlds billionaires were responsible for bettering society. He made most of his wealth through the industrial revolution and development of the Steele industry in America. Carnegie built up a revolution during the time when development, factories, and progress were growing with unfathomable speed. The steel industry had a major impact on  a number of factors within the development of north America. Firstly, there were the railroads. Railroad development in the mid 1800’s allowed travel times to be cut greatly across the nation. Products and people could travel at a rate that was up to that point unforseen. This dramatically increase the occurrence of national and international commerce- no longer did we need to ship things via steam ships or coal powered tankers- things were dramatically increasing in terms of effective shipping and merchant related things. What most of these factory providers needed to remember was workplace safety, things like training for joint health and safety committees – part 1.

The railroads play a big part in the development of Canada’s west. Now, things could be shipped from asia to Vancouver before being transported across the country to Ontario and the rest of the country. This wasn’t an easy job. Making the railroads fit across the country was expensive and involved a number of organizations both private and public. The government was involved in funding national railways like the Canadian National Railway (CNR) while private railways like the Grand Trunk Railway competed. What ended up happening was that the explosion of railway companies created too many railways too quickly and things ended up being unused. Or at least many railways were not used as frequently as expected – as well not many of these factories implemented services in training for JHSC. So this overarching cost surplus in combination with the surplus of unused rails- Canada’s national economy was severely in debt. Now, not all factories were responsible for this- it was predominately the lack of planning between nationalized and privatized railway projects that lead to this problem.