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-   -   Constructive Trusts (http://www.ottawadivorce.com/forum/f3/constructive-trusts-21109/)

mathatter89 06-10-2017 09:14 PM

Constructive Trusts
 
My understanding of constructive trusts is something along these lines, and hoping to seek clarification.

If Spouse A brings a $30,000 car into the relationship, but Spouse B is using their/spouse B's income to pay for the maintenance, operation, insurance of Spouse A, then the $30,000 car is subject to equalization, even if Spouse A paid for said vehicle and brought said vehicle into the marriage.

Is my understanding correct?

Rioe 06-10-2017 11:17 PM

Constructive trust is for common-law relationships, where there is no equalization like there is for marriage. For a common-law breakup, each person goes away with whatever is in their name, and they split joint assets equally. If this makes it patently unfair, like if someone contributed a lot of money to the other person's RRSP for some reason, or put some sweat equity into the house that was in the other person's name, then they could claim a constructive trust to recoup some of that money back. Another term to search for would be unjust enrichment.

But I thought you were married? Now, it doesn't matter who paid for what or who owned what. So it falls to equalization rules about the change in net worth.

Her asset at marriage is $30k. Was there a car loan? What is the blue book value of the car at the date of separation? What was left on the car loan at separation? Those are all that matter.

mathatter89 06-11-2017 01:06 PM

Quote:

Originally Posted by Rioe (Post 221426)
Constructive trust is for common-law relationships, where there is no equalization like there is for marriage. For a common-law breakup, each person goes away with whatever is in their name, and they split joint assets equally. If this makes it patently unfair, like if someone contributed a lot of money to the other person's RRSP for some reason, or put some sweat equity into the house that was in the other person's name, then they could claim a constructive trust to recoup some of that money back. Another term to search for would be unjust enrichment.

But I thought you were married? Now, it doesn't matter who paid for what or who owned what. So it falls to equalization rules about the change in net worth.

Her asset at marriage is $30k. Was there a car loan? What is the blue book value of the car at the date of separation? What was left on the car loan at separation? Those are all that matter.

I believe unjust enrichment or constructive trusts are applicable to common law couples only?

Anyways, in this case, for the purposes of argument.

Let's assume prior to marriage I bought a $100,000 car, with a $80,000 to go in financing (debt) on date of marriage. Let's assume the car is now worth $30,000 post separation...

Do I owe her $30,000 - $20,000 = $10,000/2 (for equalization) = $5000 or does that not count because the car has always been and is still in my name?

Rioe 06-11-2017 08:46 PM

Quote:

Originally Posted by mathatter89 (Post 221430)
I believe unjust enrichment or constructive trusts are applicable to common law couples only?

That IS what I said above, isn't it?

Quote:

Originally Posted by mathatter89 (Post 221430)
Anyways, in this case, for the purposes of argument.

Let's assume prior to marriage I bought a $100,000 car, with a $80,000 to go in financing (debt) on date of marriage. Let's assume the car is now worth $30,000 post separation...

Do I owe her $30,000 - $20,000 = $10,000/2 (for equalization) = $5000 or does that not count because the car has always been and is still in my name?

It's the EXACT same as your boat example. Whose name it's in only affects whose net worth it is included in.

Value of the car at marriage was $100k, and car loan of $80k gave you a net worth of $20k at marriage.

At separation, the car was worth $30k. You don't say, so I'm going to assume the loan has been paid off. You now have a net worth of $30k.

Your increase in net worth over the course of the marriage is $10k. You need to arrange things so that her increase in net worth over the marriage is the same as yours.

You need to know ALL your assets and debts at date of marriage and date of separation. You need to know ALL hers as well. You do this by putting the full value of anything solely in your name on your side and anything solely in her name on her side, and anything you jointly own, divide that in half for each of your sides. Add them all together, and have ONE payment go from the person with the higher change in net worth to the person with the lower change, to make the changes equal for both of you.

Let me be more explicit with madeup numbers.

Your assets and debts at date of marriage:
your car, $100k
your car loan, -$80k
your boat, $200k
your boat loan, -$150k
your RRSPs, $5k
your student loan, -$30k
your bank account $2k
your credit card -$1k
Add it all up and your net worth at marriage was $46k.

Your assets and debts at date of separation
your car, $30k
your car loan, $0
your boat, $175k
your boat loan, -$50k
your RRSP, $30k
your student loan, $0
your bank account $3k
joint bank account $4k / 2 = $2k
your credit card -$2k
joint credit card -$6k / 2 = -$3k
Add it all up and your net worth at separation was $185k.

Your increase in net worth over the course of the marriage was $139k.

Now let's make up some numbers for your wife.

Her assets and debts at date of marriage:
her car, $10k
her car loan, -$5k
her bank account $1k
her credit card -$2k
Add it all up and her net worth at marriage was $4k.

Her assets and debts at date of separation
her car, $20k
her car loan, -$10k
her RRSP, $50k
her bank account $3k
joint bank account $4k / 2 = $2k
her credit card -$3k
joint credit card -$6k / 2 = -$3k
Add it all up and her net worth at separation was $59k.

Her increase in net worth over the course of the marriage was $55k.

Your increase is $139k but hers is only $55k, for a difference of $84k. So you need to pay her $42k somehow so that you each walk away from the marriage having had an equal financial benefit from it.

I hope that helps clear things up. The change in value of EVERYTHING is subject to equalization, no matter whose name it is in.


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