Legal Fees and Add Backs
When going through the preliminary step of identifying the items to be included in the property pool that is available for distribution between parties, it may become clear, from review of bank transaction statements, that a spouse or both spouses, have withdrawn money for payment of legal costs post separation. Such withdrawals may have the consequence of depleting the value of assets.
There is a long line of authority that a party can spend money held in bank accounts or otherwise sell assets (using the proceeds of sale) to make payment of their reasonable living expenses without it having any real consequence on their property adjustment claim.
However, when it comes to payment of legal costs or disbursements from joint funds, a court may find it appropriate to “add back” such amounts withdrawn to the value of the property pool. Then, take into account the amount as a premature or interim distribution to that particular party that is accounted for when assessing property adjustment on a final basis.
However, if payment of legal costs and disbursements are shown to be paid from a person’s own endeavours, including post separation income, then payment of legal costs is not generally added back. This is also the approach taken in respect to a person borrowing money to pay legal fees. Such debt is not usually listed as a liability of the parties to be included and having the effect of reducing the value of the property pool.
WHERE TO NEXT?
Taking the next step and contacting a family lawyer can be scary. Our lawyers will make you feel comfortable so you can talk about your situation. But first, ask yourself, Do I really need a lawyer?