Property Division Divorce Lawyers
What is family property?
Family property, or marital assets, are property acquired during the marriage, specifically, after the date of marriage and before the date of separation. Any asset acquired during this period, regardless of which spouse acquired it, so long as it still exists at the date of separation, is considered family property.
Property division divorce lawyers can advise clients when it comes to determining what counts as marital assets and what does not.
Part I of the Family Law Act (FLA) govern the division of family property for married spouses. Common law spouses are not subject to the FLA and as such do not have the same entitlements, see below for information about common law spouses and property division. Under the FLA, the system used for dividing family property is a “deferred community-of property” regime. The idea is that upon marriage, each spouse is automatically entitled to share equally in the profits of the marriage.
In Canada, marriage is seen as an economic partnership and property division divorce lawyers incorporate this principle into their legal work and representation. As a result, and for the purposes of dividing family property during divorce, there are two important dates: (1) the date of marriage; and (2) the valuation date (sometimes called the separation date). These dates represent the beginning and end date of the economic partnership. While the date of marriage is usually uncontentious, the date of separation can sometimes be a major point of disagreement as it plays a significant role in determining net family property values.
What assets are divided in divorce?
All property acquired between the date of marriage and the valuation/separation date are marital property and, as such, subject to Ontario’s family property division regime, so long as they still exist at the date of separation. Property includes things like real property (homes, land, cottages, vacation properties), personal property (jewellery, furniture, art), vehicles (cars, trucks, motorcycles, recreational vehicles), investments, pensions, outstanding loan amounts owed to one of the spouses and intangible property such as intellectual property. Some property may be excluded, such as inheritances or gifts, so long as they cannot be traced to the matrimonial home. To ensure you correctly include and exclude property, be sure to consult with property division divorce lawyers, not doing so comes with the risk of missing out on your share in an asset or unknowingly sharing an asset you could have excluded.
When is the valuation date?
The Family Law Act defines the “valuation date” as the earliest of the following dates:
1. The date the spouses separate and there is no reasonable prospect that they will resume cohabitation.
2. The date a divorce is granted.
3. The date the marriage is declared a nullity.
4. The date one of the spouses commences an application based on subsection 5 (3) (improvident depletion) that is subsequently granted.
5. The date before the date on which one of the spouses dies leaving the other spouse surviving.
It is important to pick the right date and property division divorce lawyers can help you define the valuation date for your family law matter.
How are assets divided in a divorce in Ontario?
In Ontario, generally, marital assets (acquired after the date of marriage and still in existence at the date of separation) are divided equally between the spouses. This does not mean they are physically divided equally. Married spouses are entitled to an equal share in the value of the marital assets, not the assets themselves. Property division divorce lawyers help clients ensure a fair division of the marital assets. To simplify things, the end result of Ontario’s family property division is an equalization payment by the spouse with the greater net family property value acquired during the marriage to the spouse with the lower net family property value. The equalization payment is half the difference between the spouses net family property.
Who gets the house in a divorce?
In Ontario, each married spouse has an equal right to an interest in the matrimonial home and an equal right to possess the matrimonial home. In some cases, where the spouses cannot agree as to what to do with the matrimonial home, this may mean the parties both live in the home until it is sold. Typically, it is expected that either one spouse will buy out the other spouse’s share in the matrimonial home or the home will be sold and the proceeds held in trust until they can be divided.
The Matrimonial Home
Section 18(1) of the FLA defines a matrimonial home as:
Every property in which a person has an interest and that is or, if the spouses have separated, was at the time of separation ordinarily occupied by the person and his or her spouse as their family residence is their matrimonial home.
As a result of this definition, vacation or recreational properties such as cottages and trailers may be a matrimonial home and a couple may have more than one matrimonial home at any given time.
The matrimonial home is treated uniquely, in the context of net family property calculations. The matrimonial home is excluded from the date of marriage asset calculation. This means that if Spouse A owned a home on the date of marriage and it became the matrimonial home, or proceeds from the sale of that property went to a matrimonial home, that asset is not included in the calculation.
Each spouse is entitled to half the value of the family property.
According to the law, the value of property owned during the marriage that still exists at the date of separation is to be divided equally between the spouses. In addition, any increase in value of property owned at the date of marriage that still exists at the date of separation is to be shared equally between the spouses.
When the marriage ends, each spouse is entitled to half the value of the property acquired during the marriage. It is important to note the entitlement is to half the value of the property, not to half the property itself.
How long after separation can you claim property?
In Ontario, pursuant to the Family Law Act, married spouses must make a claim for equalization (equal division) of net family property within the earliest of: 6 months after the first spouse’s death, 2 years after a divorce has been ordered, or 6 years from the date of separation. If a claim is not made within the limitation period, the claim will be barred.
Calculating division of family property
When it comes to dividing the family property, generally what happens is each spouse prepares a Net Family Property Statement and the spouse with the higher value of net family property pays the other spouse half the difference, this payment is called the Equalization Payment because it is intended to equalize the amount value of property each spouse leaves the marriage with.
Net family property statements can be challenging documents to complete and the assistance of property division divorce lawyers is strongly advised. Working with professionals is the best way to ensure the family property is accurately and fairly split between the spouses.
Net Family Property Calculation
Each spouse’s net family property (NFP) is calculated as follows:
- Total value of assets at the date of separation
- Total debts/liabilities at the date of separation
- Total value of assets at the date of marriage
- Total debts/liabilities at the date of marriage
- Calculate the separation date total
- Calculate the marriage date total
Calculate the final Net Family Property: subtract the marriage date total from the separation date total
Note: the Net Family Property value can never be a negative number, if at the end of your calculations you have an NFP that is in the negative digits, it’s treated as though it were zero.
Are assets always split 50/50 in a divorce?
Upon marriage, each spouse is automatically entitled to share equally in the profits of the marriage. In Ontario, married spouses have an equal claim to have the value of property acquired during the marriage, but not to half the property itself. While usually each spouse receives half the value, sometimes, an unequal division of property may be ordered by the court when an unequal division would be unfair. Examples where an unequal division may be appropriate include: if a spouse intentionally depletes net family property, a spouse fails debts or liabilities existing at the date of marriage, the period of cohabitation was less than five years or if one spouse incurs a disproportionate share of debts or liabilities for the support of the family.
If you believe there should be a different division of family property, property division divorce lawyers can help you determine the best course of action to take.
Equalization Payment Example
The equalization payment is determined by deducting the lower of the two NFP’s from the higher, and the spouse with the higher NFP pays half the difference to the other spouse.
- Separation date assets = $100 000
- Separation date liabilities = $40 000
Separation date total (assets – liabilities)
= $100 000 – $40 000 = $60 000
- Marriage date assets = $20 000
- Marriage date liabilities = $10 000
Marriage date total (assets – liabilities)
= $20 000 – $10 000 = $10 000
Net Family Property (separation date total – marriage date total)
= $60 000 – $10 000 = $50 000
- Separation date assets = $180 000
- Separation date liabilities = $80 000
Separation date total (assets – liabilities)
= $180 000 – $80 000 = $100 000
- Marriage date assets = $30 000
- Marriage date liabilities = $10 000
Marriage date total (assets – liabilities)
= $30 000 – $10 000 = $20 000
Net Family Property (separation date total – marriage date total)
= $100 000 – $20 000 = $80 000
NFP Spouse B – NFP Spouse A = $80 000 – $50 000 = $30 000
Spouse B pays $15 000 (half of the difference between NFP’s) to Spouse A as an equalization payment.
Is property acquired after separation marital property?
Generally, no, property acquired after separation are not marital property and is considered separate from the marital assets. However, there may be cases in which such property is marital property, property division divorce lawyers can help you understand if you are in such a circumstance.
Is a house owned before marriage marital property in Ontario?
Generally, property owned before marriage are not considered marital assets and not subject to equalization. However, the matrimonial home is an exception to this general rule. A home owned by one spouse before marriage that becomes the matrimonial home after marriage, will be included as marital property.
What property is included?
Section 4(1) of the Family Law Act defines “property” as follows: “property” means any interest, present or future, vested or contingent, in real or personal property and includes,
(a) property over which a spouse has, alone or in conjunction with another person, a power of appointment exercisable in favour of himself or herself,
(b) property disposed of by a spouse but over which the spouse has, alone or in conjunction with another person, a power to revoke the disposition or a power to consume or dispose of the property, and
c) in the case of a spouse’s rights under a pension plan, the imputed value, for family law purposes, of the spouse’s interest in the plan, as determined in accordance with section 10.1, for the period beginning with the date of the marriage and ending on the valuation date;
This means, property includes, but is not limited to: This means, property includes, but is not limited to:
Real property, such as houses or land
Vehicles including cars, motorcycles, boats, RV’s, ATV’s, snowmobiles
Personal property, such as furniture, jewellery, art, collectibles
Ownership in a business
Stocks and investments
Intangible property, such as patents, rights to music and art
Funds held in a pension plan or RRSP
Funds held in trust for you to access at a later date
Moneys owed to you in outstanding loans
How are household items divided in a divorce?
In Ontario, married spouses have an equal entitlement to half the value of marital assets, but not to the physical property itself. The household items included are only those acquired during the marriage.
Are separate bank accounts marital property?
Yes, funds in a spouse’s bank account, separate from that of the other spouse, are marital property and subject to equalization. However, if the funds are in a joint bank account with another party, this may complicate the situation.
What property is excluded?
Section 4(2) of the Family Law Act provides that certain property owned on the separation/valuation date may be excluded from net family property calculations:
- Property, other than a matrimonial home, that was acquired by gift or inheritance from a third person after the date of the marriage.
- Income from property referred to in paragraph 1, if the donor or testator has expressly stated that it is to be excluded from the spouse’s net family property.
- Damages or a right to damages for personal injuries, nervous shock, mental distress or loss of guidance, care and companionship, or the part of a settlement that represents those damages.
- Proceeds or a right to proceeds of a policy of life insurance, as defined under the Insurance Act, that are payable on the death of the life insured.
- Property, other than a matrimonial home, into which property referred to in paragraphs 1 to 4 can be traced.
- Property that the spouses have agreed by a domestic contract, marriage contract or prenup is not to be included in the spouse’s net family property.
- Unadjusted pensionable earnings under the Canada Pension Plan.
This means the following property may be excluded from the NFP calculation:
Property acquired by gift or inheritance after the date of marriage, other than the matrimonial home
Examples: a car your father gave you after the date of marriage or a ring you inherited from a relative
Property that can be traced back to a gift or inheritance, other than the matrimonial home
Examples: a car you bought with money given to you by your mother or a piece of art you purchased with funds you inherited
Income earned from a gifted or inherited property, so long as the testator or donor expressly stated that the property was to be excluded from the net family property
Examples: Interest earned on money you inherited
Damages for personal injury or part of a settlement representing those damages or a right to damages
Examples: Damages awarded from a lawsuit for injuries you suffered in a car accident
Life insurance proceeds or a right to such proceeds
Example: Proceeds received from a parent’s life insurance policy
Unadjusted pensionable earnings under the Canada Pension Plan.
Important notes about exclusions:
- If a property was gifted to or inherited by a spouse and it became the matrimonial home or the proceeds of the property went to the matrimonial home, it cannot be excluded.
- Excluded property, such as a gift or inheritance, may no longer be in the same form as when it was received. For example, if a car was purchased with money from an inheritance. The car can still be excluded so long as it can be traced back to the originally excluded property, namely, the inherited funds. ***Important: to maintain such an exclusion, never mix inheritance funds with other funds and keep them in a separate bank account. Keep all receipts and transaction records so you can trace the property back to the original exclusion.
- The spouse claiming the exclusion bears the onus of proving the claim.
***Determining what is or involves technical legal knowledge and experience held by property division divorce lawyers.
How is pension split in divorce?
Pensions are considered property for the purpose of division of marital assets upon divorce. Generally, the pension value included is the amount incurred during the marriage. The value of the pension is determined by the pension administrator. Courts can order an immediate lump sum transfer out of their pension plan. The payment does not have to come out of the pension itself, rather, the value may be paid from other property, such as the matrimonial home.
How do I protect my pension in a divorce?
Any assets acquired during the marriage form the net family property and each spouse has an equal entitlement to half their value. Pensions are property so the amount the pension grew during the marriage is included. However, there is no entitlement to half the actual property, only to the value, so it may be possible to keep the pension in tact and to pay out the entitlement to the other spouse from another source, such as other property.
Unequal division of property
In some cases, the equalization payment may be varied by the court such that it is not 50% of the difference between the spouses NFP’s. The objective of the equalization payment is for both spouses to leave the marriage in an equal financial position. However, where an equalization payment would result in unfairness to one of the spouses, section 5(6) of the FLA gives the court discretion to order an amount that is more or less than half of the difference between the parties’ respective net family properties.
Section 5(6) of the FLA says:
The court may award a spouse an amount that is more or less than half the difference between the net family properties if the court is of the opinion that equalizing the net family properties would be unconscionable, having regard to,
(a) a spouse’s failure to disclose to the other spouse debts or other liabilities existing at the date of the marriage;
(b) the fact that debts or other liabilities claimed in reduction of a spouse’s net family property were incurred recklessly or in bad faith;
(c) the part of a spouse’s net family property that consists of gifts made by the other spouse;
(d) a spouse’s intentional or reckless depletion of his or her net family property;
(e) the fact that the amount a spouse would otherwise receive under subsection (1), (2) or (3) is disproportionately large in relation to a period of cohabitation that is less than five years;
(f) the fact that one spouse has incurred a disproportionately larger amount of debts or other liabilities than the other spouse for the support of the family;
(g) a written agreement between the spouses that is not a domestic contract; or
(h) any other circumstance relating to the acquisition, disposition, preservation, maintenance or improvement of property.
Who is responsible for debt after divorce?
In Ontario, marriage is seen as an economic partnership and both spouses are entitled to an equal share of the value of the proceeds of the partnership and are equally responsible for debts and liabilities. However, in extreme cases, such as if one spouse deliberately incurs debt to deplete net family property, if the debt or liability is the result of recklessness, such as gambling, or if one spouse incurred a disproportionate amount of debt to support the family, the court may order a different remedy.
Common law spouses property rights
Many individuals in common law relationships mistakenly believe that if the relationship ends, they have the same property rights as married spouses. However, in Ontario, common law spouses do not have the same property rights as married spouses, under the Family Law Act. As a result, the parties are only entitled to the assets they brought into the relationship and any shared property is to be divided equally. It is critical to understand that common law property rights are based on ownership. There is virtually no difference between the property rights of common law spouses who live together for ten years and platonic roommates who lived together for ten years.
The question of whether the exclusion of common law spouses from the entitlements of married spouses was violation of equality rights protected by the Charter of Rights and Freedoms was decided by the Supreme Court of Canada in 2002 in Nova Scotia v. Walsh. The Court drew a bright line between couples who choose to cohabit but not marry and those who choose to marry, and held that the narrow definition of spouse found in the Family Law Act is constitutional.
This means, for example, if you are in a common law relationship and you and your spouse both invest money in buying a home but only the other spouse is on title, or if you and your spouse purchase vehicles but they are both in the name of your spouse, you have no automatic entitlement to a share in the property.
Common law spouses must turn to legal action based on principles of equitable ownership, such as unjust enrichment, constructive trust and resulting trust, to advance a claim over property accumulated during the relationship. This form of litigation can be considerably expensive.
There are a number of ways to mitigate such situations. A cohabitation agreement can be useful to prevent such situations by setting out what happens to specific property at the end of the relationship. It is also important to maintain a document record of any transactions a common law spouse participates in that results in property held in the name of the other spouse only.
Property division divorce lawyers can help common law spouses, in addition to legally married spouses, with their property issues as well as with drafting agreements to help protect your rights and your assets.
Do I need a lawyer for division of property?
While you do not need to hire property division divorce lawyers to make an application for divorce that includes property claims, given the intricacies of property division, legal representation is the best way to ensure your rights are fully protected and that you receive your equal share of the proceeds of the marriage. At Smith Law we understand the challenges of legal costs, especially at such a sensitive time in one’s life.
In addition to offering full legal representation through your divorce and property claims, we also offer flexible cost-effective options to traditional full representation, including, unbundled services (limited scope retainer), flat rate fees and legal credits.
In Canada, marriage is seen as an economic partnership and upon dissolution of marriage, the spouses should leave with an equal share of the proceeds.
There are two important dates: the date of marriage and the valuation date (separation date).
Assets acquired by the spouses between the date of marriage and valuation date are to be shared between the spouses.
When a marriage ends, each spouse is entitled to half the value of the property acquired during the marriage, not to half the property itself.
Property is divided by calculating the Net Family Property (NFP) of each spouse and the spouse with the higher NFP paying half the difference to the other spouse.
Some property can be excluded from NFP calculations including: matrimonial home, gifts, inheritances, personal injury damages, life insurance proceeds, unadjusted CPP earnings.
Unequal division of property can be ordered by the court if an equal division of property would be unfair or unconscionable.
Common law spouses do not have the same property entitlements as married spouses.
Property division divorce lawyers can help you understand the intricacies of property division and represent your interests in achieving a fair division of marital assets.