There are a number of unique issues that can arise when a farming family goes through a separation or divorce. One of these areas arise when the parties have livestock or other animals. Generally, the specifics of how animals will be treated in the family court will vary from province to province. In Saskatchewan, animals are treated as property regardless if they are a business asset or a companion animal. Courts (in Saskatchewan) do not generally regard emotional attachment when assessing division of property, so while you (or your spouse or children) may have an emotional attachment to the animal(s), the legal analysis applied in Saskatchewan is no different than any other piece of property.
When property is to be divided, the process is set out in The Family Property Act. Under that legislation it is important to identify what property is subject to division and what the value of that property is to be divided.
Regarding what is subject to division, under the Saskatchewan legislation, an exemption can be claimed for property that was acquired prior to the commencement of the spousal relationship. That said, it is up to the person claiming the exemption to prove the amount of the exemption. This requires establishing not only what livestock was owned at the commencement of the relationship, but what the value of the livestock was at that time (as increases in value are not exempt from division under the Act).
Furthermore, if the livestock owned at the commencement of the relationship are sold and new livestock are acquired in exchange, an exemption claim may still be possible, provided the spouse claiming the exemption can trace the assets from the commencement of the spousal relationship to the end of the spousal relationship. As livestock are often sold and replaced, this can create a number of risks that a spouse will lose their ability to claim an exemption or be unable to prove their exemption over time. This becomes even more so if livestock owned prior to the spousal relationship become comingled with shareable assets or proceeds from the sale of livestock go into a shared bank account.
Let’s look at an example. Say prior to marriage the husband owned 300 dairy cows. Husband and wife married and formed a dairy business together. Over time, the cows previously owned by the husband were either sold or died. New cows were purchased and over time they too were sold or passed away. After 20 years, the couple decides to separate and at the time of separation they have 400 dairy cows. Should the husband receive an exemption for the value of the 300 dairy cows he owned 20 some years ago? It will be up to the husband to establish and prove such an exemption. The fact that the initial herd no longer exists and had been comingled with shared assets over a long period of time will make establishing such an exemption difficult.
If you are entering a spousal relationship, it may be prudent to pre-assess or determine a value for any exemption claim you wish to preserve. A properly drafted cohabitation or prenuptial agreement can minimize or eliminate the risk of losing your exemption over time (and the need to have to diligently keep track of livestock for family property purposes over the years).
Predetermining values can also minimize risk and expense if a disagreement later arises pertaining to the value of livestock subject to exemption or division. If valuation of livestock becomes an issue, typically some form of special knowledge or expert opinion may be required. While some animals (such as cattle) may be valued based on market, there can still exist complexities that require expert opinion (such as breeder bulls). Other complexities can exist where there is genetic material (such as frozen semen) that could have a value to be assigned to it, and therefore divided between spouses. Determining value retrospectively to establish exemption amounts adds further complexities.
Therefore, if you are entering a spousal relationship with preowned livestock, consideration should be given to what protections should be put in place to minimize risk if a separation occurs in the future. Clearly identifying what livestock is being brought into the relationship and the value associated with the livestock may help maintain and prove an exemption claim if it becomes necessary down the road.
Kimberly D. Visram
STEVENSON HOOD THORNTON BEAUBIER LLP
500 – 123 2nd Avenue South, Saskatoon, SK S7K 7E6
This article is provided for general informational purposes only and does not constitute legal or other professional advice.
This article was originally published in The Western Producer on December 8, 2022.