Free information about equalization of marital property in Canada

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Free information about equalization of marital property in Canada

 

The law in Canada about the division or equalization of family or marital property is governed by each individual province. This summary only applies to the law in Ontario and has been copied from a Ministry of the Attorney General's Office publication.

Dividing your property in Ontario

The law says that a husband and wife share responsibility for child care, household management and earning income during their marriage. In the eyes of the law, a marriage is an equal partnership. When a marriage ends, the partnership is over and property has to be divided.
 

To recognize the equal contribution of each person, the general rule is that the value of any property that you acquired during your marriage and that you still have when you separate must be divided equally, 50-50. Property that you brought with you into your marriage is yours to keep if your marriage ends. Any increase in the value of this property during your marriage must be shared.

There are some exceptions to these rules. The law allows you to keep some property that you have at the end of your marriage for yourself. This property is called excluded property. It includes:

• gifts you received during your marriage from someone other than your spouse;
• property that you inherited during your marriage;
• money that you received from an insurance company because someone died; and
• money that you got or that you have a right to get as a result of a personal injury, like a car accident.

The family home is another exception to the general rules. The law says that when your marriage ends, the full value of the family home must be shared even if one of you owned the home before you were married, received it as a gift or inherited it.

Unlike other types of property, you do not get to keep for yourself what the house was worth at the time of your marriage.

You and your spouse can agree to a different split. Or, in some circumstances, you can ask the court to divide things differently. The court can only divide property differently in very special situations and if a 50-50 split would be extremely unfair to one of you.

The legal rules that you have to follow to calculate the value of your property and divide it between you and your spouse can be complicated. It is a good idea to consult a lawyer about how the rules apply in your case.

The next section will give you an idea of how these rules work. Remember that this is only a description of the general rules. There may be other rules and exceptions that would apply to the facts in your case.

The first thing that you and your spouse must do is to separately calculate the total value of your share of the family property according to the rules set out in the law. You must be fair and honest when you do this. If you go to court, you must prepare a full financial report of all your property, debts and income. You must swear that it is accurate.

You can calculate your share of the family property using Steps 1-4 set out below:

Step 1: Find out the value of the property you had on the day you separated

• Your property is anything that is in your name or that belongs to you.
• You must list all your property, including property in other parts of the country and the world. For example, your list of  property might include your home, a business, a car, furniture, a sound system, clothes, sports equipment, jewellery, savings in bank accounts and retirement savings plans, and your right to a pension, even if you will only get the pension years from now.

• If you own some property together in both names, you each put half the value of the property on your list.
 

Step 2: Subtract the value of the debts you owed on the day that you separated

• Money owing on credit cards, the amount left to pay on your house and a car loan are all examples of debts.
• List them at their value on the day of separation.

Step 3: Subtract the value of property that the law allows you to keep for yourself

• This property includes gifts and inheritances received from someone other than your spouse during your marriage, money received from an insurance company because someone died, and money you got or have a right to get as a result of a personal injury.

Step 4: Subtract the value of property that you brought into your marriage less the value of debts

• Add up the value of all the property that you owned when you married.
• Do not include your family home, even if you owned it on the date of your marriage.
• Subtract all the debts you had when you married.

The final step will tell you if one of you owes the other any money.

Step 5: Find out if a payment is owing

• Compare the value of your share of the family property to the value of your spouse’s share.
• Subtract the smaller amount from the larger amount.
• Divide the difference by 2. This is the amount that the spouse with the larger share must pay to the spouse with the smaller share.
• This payment is called an equalizing payment.

Note: If a person has more debts than property, the value of his or her share of the family property is zero.

For instance, if you owed the bank $15,000 when you separated, and you have only $8,000 worth of property, the value of your family property is $0 for the purposes of calculating an equalizing payment.

Q Our calculations say I am entitled to a payment of $5,000. Do I get this in cash?

A Not necessarily. The payment can be paid in cash. It can also be made by giving you property worth $5,000. Or, an amount could be put towards your rent or mortgage every month until $5,000 is spent. How the payment will be made is one of the things that you can arrange in your separation agreement. Or, it is one of the things the court can decide.
 

Q We each went to a lawyer and got some information and advice about how the law says our family property should be divided. Now we’ve come to our own agreement about things. Can our separation agreement divide things differently from the way the law says?

A Yes. You are free to divide your property any way you want in your separation agreement. You should each have your own lawyer look over your separation agreement before you sign it. You cannot easily change your separation agreement later.

Q I received a car as a gift from my father. I know that the law says that if we separate, I don’t have to share the value of gifts I received during our marriage. I have decided to sell the car. Once I sell the car, is the money I get for it part of the property I must share with my spouse if we decide to separate?

A Not necessarily. If you keep the money separate, for example, in a savings bond, so that you can always trace it to the sale of the car, it will be excluded from the property you must share at the end of your marriage.
 

There is an important exception to this general rule that affects the family home. If you use the money from the sale of the car to pay down the mortgage on your family home or to renovate it, you must share the full value of the family home with your spouse if you separate. Once money is put into the family home it must be shared, even if the money came from a gift or an inheritance or other property that the law says you do not have to share with your spouse.

Q It’s my wife’s fault our marriage is over. She started seeing another man and has decided that she wants out. Why should I have to share the value of my property with her now just so this new guy gets it?

A Your wife’s new relationship has no effect on the division of property at the end of your marriage. The law on dividing family property has nothing to do with why your marriage has ended. The law sees a marriage as an equal partnership. When it is over, the financial benefits of the partnership have to be divided evenly and fairly. The calculations are made without looking at who is at fault or who is to blame.

Q My husband has been paying into company pension plans for 32 years. I stayed home to look after the kids and now I am doing odd jobs for a little extra money. If we separate, do I have a right to share his pension?

A Yes. In most cases, a professional financial consultant or actuary will have to look at your husband’s pension plan to establish its value. This amount is added to your husband’s share of the family property. Or, you and your husband can agree that when he starts receiving his pension, you will get a certain percentage of it. You should see a lawyer to make sure the paperwork is done properly.
 

Important: As soon as you separate, you are no longer recognized as a spouse under pension law. For example, if your husband dies after you separate, but before you reach any agreement, you do not have a right to a survivor’s benefit. You should make sure that your agreement or court order is clear about your rights to his pension.

Q Last summer, my brother and I built an addition to my house. The addition cost $10,000 and added $20,000 to the value of the house. Now my wife and I are splitting up. Can I get the $20,000 back?

A No. You have to share the full value of your family home with your wife. It doesn’t matter if you put more money or work into your home. There are some very limited exceptions to this rule.

Q My parents left me their house when they died. I have been living in it for the last two years with my boyfriend. We are planning to get married and raise a family here. If our marriage doesn’t work out, I don’t want to lose the house to him. In our marriage contract, can we say that the house is mine no matter what happens?

A Yes. Your marriage contract can say that you own the house and that its value when you married, and any increase in its value during your marriage, will be yours. But, your husband will have the same right as you have to stay in the family home if your marriage breaks down. You cannot put anything in your marriage contract to change this.

If your marriage ends, your husband may be able to stay in the house until you can agree to, or the court decides on, other arrangements.

Q We live on a big dairy farm. Is the whole farm considered to be our family home?

A No. Your family home is only the part of the farm where you live, the house and the small area around it. The rest of the farm is property like any other property. It is not covered by the special rules for family homes.

Q I’m so upset by everything, I cannot cope with making lists of property right now. Do I have to do this right away?

A You have six years from the day you separated to go to court to ask for a decision on the amount of the equalizing payment. If you get a divorce, you may have less time. You would have six years from the day you separated, or two years from the date your divorce is final, to go to court, whichever date comes first.

Q I am worried that now that I’ve moved out, all our family property will disappear before we have a chance to resolve things. I think my husband might get rid of it just to keep me from sharing in its value. Is there anything I can do?

A Yes. You can go to court and ask the court to stop your husband from giving away the property. The court may tell him not to sell or dispose of the property or it can order that it be put in someone else’s care to protect it.

Common law couples

Q We are not married but we’ve been living together for 15 years. If we split up, do we have to share the value of our property?

A Maybe. Only married couples have an automatic legal right to half the value of family property. You can ask your partner to pay you back for your contribution to property that your partner owns. If your partner does not agree, you can go to court to make your claim. But the claim will be based on another area of law, not family law. Ask a lawyer for advice.

 

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Last updated on June 1, 2016