Obtaining professional degrees and licenses is time consuming and costly, and can be challenging for a family’s budget, often requiring the other spouse to support the family for a time. Both parties usually expect to benefit from these professional accomplishments and career advancement. However, if the relationship ends, can a spouse be compensated for their contributions to the other spouse’s education? Courts have wrestled with whether degrees or licenses constitute property that can be made available for equalization.

This blog will explore the concept of family property division and how, if at all, professional licenses are included in equalization calculations.

Court Looks Beyond the Traditional Definition of Property

In Caratun v. Caratun, the husband immigrated to Canada to practice as a dentist. During the time he worked to pass examinations and obtain his license, his spouse worked to supplement their income and to assist him in realizing his goal. Two days after he obtained his license, he informed his wife that he wanted a divorce, when there were minimal family assets but his future income potential was significant. The question was whether the license to practice as a dentist could be included in the husband’s net family property, and if so, what value should be included.

Section 4(1) of the Family Law Act (also referred to as the “FLA”) defines property as “any interest, present or future, vested or contingent, in real or personal property”. Justice Van Camp looked to the Michigan Court of Appeal case of Woodworth v. Woodworth, where the Court held that whether an advanced degree can be defined as property was besides the point, since the focus should be on equitably dividing amongst the parties what they have.

Professional Licenses Are a Valuable Asset But Lack Traditional Attributes of Personal Property

For the judge, this approach was more consistent with the policy behind Ontario’s Family Law Act. Looking at the legislation, it is clearly based on the “recognition that a marriage is a partnership”. Spouses are presumed to make equal contributions to the partnership and are entitled to an equal share of the property acquired during the marriage. Consequently, Justice Van Camp held that the definition of property needed to be “construed in light of the partnership theory of marriage which underpins the FLA”. Accordingly, the traditional interpretation of property was contrary to the Family Law Act’s policy of equally dividing wealth acquired during marriage. While professional licenses lack the traditional attributes of personal property, they are a valuable asset and can be acquired during a marriage through the joint efforts of the spouses.

Justice Van Camp recognized the fact that licenses cannot be transferred and have no market value as an obstacle to including such assets as property. Assessing the value of a license would require determining the licensee’s projected future income. The judge noted that for some commentators, this would award a spouse an interest in the other’s future earnings. Yet, for Justice Van Camp “the fact that a licence’s value may be assessed according to the enhanced earning capacity it confers, and is therefore contingent on the holders’ future income, does not prevent it from being property under the FLA”. A further obstacle is the reluctance to give a spouse an interest in a license that is personal to the license holder. However, as the judge noted, the Family Law Act does not function by having a spouse acquire an interest in the other’s property. Instead, the spouses’ net family properties are equalized, with an equalization payment owed to the spouse with the lesser net family property. This payment is “not an entitlement to property, but an entitlement to the difference between certain values of property”.

Ultimately, Justice Van Camp concluded that the definition of property in the Family Law Act should capture assets, such as licenses, that do not fall within the traditional understanding of personal property.

Appeal Court Finds Family Law Act Does Not Justify Including Education as Property

The decision in Caratun was appealed to the Ontario Court of Appeal. At trial, the judge accepted the wife’s position that the dental license was property within the Family Law Act. Yet, after reviewing prior cases and articles on the subject, there were several difficulties with that conclusion.

The Court of Appeal first looked at the characterization of a professional license and noted that the only right it confers is the right of the license holder to work in a particular profession. It is a personal right of the holder and is not capable of transfer. So, when spouses separate, there is nothing available for transfer. For the Court, things that are non-transferrable, like the right to practice in a profession, “do not constitute property in any traditional sense”.

A further challenge stems from the use of the definition of property in the equalization process in the Family Law Act. As the Court noted, there was no way that the definition of property could be interpreted to include work that was to be performed by spouses in the future, and the license produces nothing without the personal efforts of the licensee. The Family Law Act’s support provisions “allow one spouse to share in the fruits of the other spouse’s future labours”, not equalization. The Court also noted that there was no difference in substance between the right to practice a profession and the right to work at any job requiring special skills or knowledge. For the Court, there was nothing in the Family Law Act that justified that such attainments constituted property.

Professional Licenses Do Not Constitute Property

Beyond the conceptual difficulties in treating license as property, there was also the issue of valuing the license, which the Court felt would be speculative. A range of contingencies meant that reaching a fair valuation would be difficult. There was also the possibility of inequity, since support orders can be varied in response to a change in circumstances, but there is no way to change an equalization payment. For the Court, the problem stems from treating the license as property on the valuation date “when most of its value depends on the personal labour of the licensed spouse after the termination of the relationship”. Further, the future labour is not earned or existing on the valuation date.

Consequently, the Court concluded that a professional license does not constitute property under the Family Law Act.

Issue Can be Dealt With as a Matter of Support Rather Than Property

Licenses and professional degrees may not be included as property for equalization, but where parties make a contribution to the career accomplishments of the other spouse, the spouse can be entitled to compensatory support. In Kierans v. Kierans the judge looked at several American cases that considered how to compensate a party for the contribution they make to the career or educational accomplishments of their partner. In DeLa Rosa v. DeLa Rosa, the Minnesota Supreme Court recognized that in these cases one spouse may forgo earning income to enable the other to pursue education with the “expectation that the parties will enjoy a higher standard of living in the future”. That Court summarized the problem as allowing the party with a greater earning power to retain all the benefit of the degree where the education was supported by another’s efforts and sacrifice would be unconscionable. In Kierans, Justice O’Brien agreed, and found that the amount of spousal support should “acknowledge the plaintiff’s contribution to the defendant’s career potential”.

A similar finding was made in Keast v. Keast, where the judge found that the plaintiff should receive spousal support that went beyond her basic needs and accustomed standard of living, but should also recognize her “very real physical, psychological and financial sacrifices and contributions to the realization by her husband of his dream and efforts to become a doctor”.

Key Takeaway: Spouses May be Compensated Through Spousal Support

Ontario courts have determined that professional licenses and degrees cannot be viewed as personal property within the Family Law Act. Consequently, they cannot be valued and included in a party’s net family property for equalization. Instead, spouses who make contributions to the other spouse’s professional accomplishments may be entitled to spousal support.

NULaw in Toronto Provides Trusted Advice on Spousal Support Matters

Contact the knowledgeable family law lawyers at NULaw in Toronto if you are contemplating a separation or divorce. Our family law team will help you navigate the process and will provide you with practical advice and options to move forward. We will protect your rights and negotiate the best outcome for you, allowing you to focus on your next steps. Contact us online or call us at 416-481-5604 to speak with a member of our team regarding your family law matter.

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