Ten (10) years ago, shoe mogul Steve Madden married long-time friend and employee Wendy Ballew. At the time, Madden was serving a 31-month prison sentence for securities fraud and stock manipulation. His involvement with brokerage firm Stratton Oakmont was depicted in the Oscar-nominated movie, The Wolf of Wall Street.
Ballew was Steve Madden's Director of Operations and she would regularly visit him in jail for business meetings. There, the two fell in love and got married. Now, the couple have three young children together. InTouch Weekly reports that the couple are ending their relationship on good terms.
If Madden and Ballew lived in Ontario, the Family Law Act would govern how the parties should divide their property. In Ontario, the division of property is addressed through the sharing of value of the property owned by married spouses. The objective of such a regime is to ensure that each spouse will share equally in the economic wealth of the marriage at its breakdown, without any change in property ownership.
Pursuant to section 5(1), upon the breakdown of the marriage, the spouse whose net family property is the lesser of the two net family properties is entitled to one-half the difference between them. Net family property is defined in section 4 of the Family Law Act as:
The value of all the property, except property described in subsection
(2), that a spouse owns on the valuation date, after deducting,
(a) The spouse's debts and other liabilities, and
(b) The value of property, other than a matrimonial home, that the spouse
owned on the date of the marriage, after deducting the spouse's debts
and other liabilities, other than debts or liabilities related directly
to the acquisition or significant improvement of a matrimonial home, calculated
as of the date of the marriage.
The payment from one spouse to the other is referred to as an equalization payment and is equal to one-half the difference between the spouses' net family properties as defined above.
To satisfy the equalization payment, the parties may agree to one or more of the following methods:
- Pay the equalization amount in one or more lump sum installments;
- Sell properties and divide the proceeds of sale;
- Transfer legal title of an asset from the paying spouse to the recipient spouse;
- Hold a property in trust for the recipient spouse for a number of years;
- Transfer money from the paying spouse's pension plan, Registered Retirement Savings Plan (RRSP) or Registered Retirement Income Fund (RRIF) to an account owned by the recipient spouse.
In Madden's case, he is most likely the spouse with a higher net family property and, as such, must make an equalization payment to Ms. Ballew. However, prior to making an equalization payment to his wife, both parties must consider the contingent tax consequences that flow from property transfers. Ms. Ballew should also ensure that Madden has provided full and accurate financial disclosure prior to agreeing to the quantum of the equalization payment owed by Madden.