A Severance Package is only Property in Family Law matters when it has Crystallized
The definition of property under s. 4(1) of the Family Law Act states that property means any interest, present or future, vested or contingent in real or personal property. This definition does not distinguish between property at the date of marriage and property at the date of separation. Therefore, in order for a severance package to be considered property at either the date of marriage or at the date of separation, entitlement to the severance package must have crystallized (exist) at the date in question.
Recently in Dembeck v Wright, the Court of Appeal for Ontario held that the trial judge erred in deciding that a portion of the husband’s severance package was property that the husband owned at the date of marriage. The husband’s employment was terminated three days before separation. The husband argued that the portion of his severance package that was correlated to employment before marriage should be classified as property at marriage and as a result should be excluded from his Net Family Property. The Court of Appeal ruled that a severance package, including eight weeks’ pay under the Employment Standards Act (ESA), is only considered property once entitlement to the severance package has crystallized.
Consequently, the portion of the husband’s severance package that was correlated to employment before marriage could not be classified as property at marriage because it was not property in existence at that date. Entitlement to a severance package crystallizes when: (1) an employee’s employment is terminated and (2) the circumstances of the employee’s termination meet the criteria for severance under the ESA. Only once these conditions are met can a severance package be classified as property.
Furthermore, the Court of Appeal stated that a portion of a severance package that had accumulated before marriage but had not crystallized at the marriage date cannot be retroactively reclassified as property once the entitlement to the severance package crystallizes.
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