The Division of Family Property in Ontario
The Family Law Act (FLA) governs how property is divided between married individuals undergoing a separation or a divorce in Ontario. In a nutshell, property is left in the hands of the owner and is not divided directly. Instead an equalization payment is ordered which is basically an economic snapshot of the value of the assets each party owned on the date of the marriage and on the date of their separation (the “valuation date”). Everything is valued as of each of these two dates.
Once the value of the property on the date of the marriage (less any debts or liabilities) is calculated, the value of the property owned on the valuation date (less any debts or liabilities) is subtracted from that amount, unless it is excluded by the FLA or by contract. This amount is called the Net Family Property (NFP) and is calculated for both spouses. The spouse with the lesser NFP value is entitled to an equalization payment equal to half the difference between the NFPs of each respective spouse.
Consider the following brief example:
Calculating Net Family Property and the Equalization Payment:
Spouse A Assets (less debts or liabilities)
Separation Date (valuation date) $100,000
Marriage Date $20,000
Net Family Property (NFP) = $80,000
Spouse B Assets (less debts or liabilities)
Separation Date (valuation date) $50,000
Marriage Date $20,000
Net Family Property (NFP) = $30,000
Equalization Payment = (NFP of Spouse A – NFP of Spouse B) ÷ 2
= $ 50,000 ÷ 2
= $ 25,000 (Spouse A pays Spouse B)
As illustrated by the example, the entitlement to an equalization payment depends on whether the calculated NFP of one spouse is lower than that of the other spouse and the amount of the payment will depend on the difference between the two NFP values. This all depends on what is and is not included as “property” when calculating a spouse’s NFP.
Included Property in NFP Calculation
Generally, all property owned by a spouse is included as part of their NFP calculation; for example: real estate, cars, personal items, bank accounts and investments, and businesses. The FLA defines “property” as any present or future interest in personal or real property. This may also include rights under pension plans that a spouse had between the time of marriage and the “valuation date”. However, there are special rules under the FLA that determines whether certain types of property are included in calculating a spouse’s NFP.
Special rule for the Matrimonial Home:
A “matrimonial home” is the home you and your spouse ordinarily occupied as your family residence prior to a divorce or separation. There can be more than one matrimonial home; for example, a cottage may also be considered a matrimonial home.
When calculating a spouse’s NFP, the value of the property on the date of marriage will not include the value of a matrimonial home. Whereas, the entire value of the matrimonial home will form part of a spouse’s property on the valuation date, and is included in calculating a spouses NFP. This works to increase a spouse’s NFP value and may ultimately increase the amount of the equalization payment they will have to pay the other spouse.
It is hard to know in advance if a particular home will be considered a matrimonial home for the purposes of equalization. This is why it is important that you seek legal advice from an experienced Toronto Divorce Lawyer.
Special rule for gifts and inheritances:
Any gift or inheritance a spouse receives during the marriage is generally not included in their NFP calculation. However, the income generated by a gift or inheritance is included as part of your NFP unless it was expressly stated that it would not by the donor or testator. Additionally, if the gift or inheritance was used to purchase a matrimonial home or part of it, it is included in calculating a spouse’s NFP.
Other excluded properties are damages or right to damages for personal injury, and property, other than a matrimonial home, which can be traced back to some of the excluded properties discussed above.
It is important to know that Property division provisions under the FLA only apply to married spouses. Common law spouses are not entitled to an equalization payment. Common law spouses may bring trust claims by convincing a court that they are entitled to a payment from the other spouse to pay back for a direct or indirect contribution to property that the other spouse owns.
For individuals going through a divorce in Ontario, division of property matters can be quite complex and confusing. It is important to seek the legal advice of an experienced Toronto divorce lawyer to make sure your rights are adequately protected.
For more information about issues relating to the division of family property in Ontario or obtaining a divorce in Ontario, please contact our Toronto divorce lawyer.
NOTICE AND DISCLAIMER: The material posted on this website is for informational purposes only and should not be relied upon as legal advice. If you are in need of legal advice relating to your particular situation it is highly recommended to consult with a lawyer.
Divorce and Separation
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Division or Equalization of Family Property
Treatment of a Matrimonial Home
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