Upon separation or divorce, a couple must appropriately divide the property acquired during marriage or cohabitation. While the rules vary slightly depending on whether the couple was married or a common law couple, generally, property is divided fairly between the two parties.
Typically, property is divided equally, with each spouse taking 50 percent of all property. This applies regardless of whose name is on the title of the assets. However, you are permitted to keep the following:
- Gifts you received during the marriage from someone other than your spouse
- Any property inherited during the marriage that was not given to both spouses
- Money received as the result of a personal injury accident
- Money received from an insurance company due to wrongful death
While most property that you owned prior to the marriage is yours to keep upon divorce, any increase in the value of this property during your marriage must be shared equally. Additionally, any property purchased during the marriage is split evenly, regardless of which spouse paid for it.
One exception to the rule that you are permitted to keep any property separately owned prior to the marriage is the marital home. The marital home is where the husband and wife resided during the marriage. This can be multiple properties, depending on whether the husband and wife owned multiple homes, such as beach properties and other vacation homes. The marital home is split evenly, regardless of whether one spouse owned the property prior to the marriage, inherited it during the marriage, or received it as a gift.
To determine how much property each spouse should receive, the parties must first calculate the “net family property.” This is the amount of property each spouse currently has. There is a separate net family property for each spouse and, at the end of the property division, each spouse is entitled to an equal net family property. The following details how each net family property is calculated.
You must first calculate the value of all assets the date of separation. Create a list of all property that is in your individual name. Such property includes furniture, jewelry, money in bank accounts, retirement accounts, and personal items. Any property owned jointly should be valued and each spouse should include half the value of the property on his or her list.
Degrees and licenses are not considered assets that need to be included in the net family property calculation. However, if a spouse supported the other spouse while obtaining a degree or license, this may affect the amount of spousal support and/or child support awarded.
Second, deduct the value of all liabilities at the date of separation. This includes any credit card debt, outstanding mortgages, and car loans. These liabilities should be subtracted from the amount of assets in the first part above.
Third, deduct the value of all assets exempt from the equal division rule. Any property that you (a) owned separately prior to marriage, (b) received as an individual gift or inheritance, or (c) received from an insurance company due to a death or from another individual subsequent to a personal injury claim, is exempt from being included in the marital property. This property is valued as of the date of your marriage, if received prior to the marriage, or at the date of receipt, if it was received during the marriage.
Four, add the value of any liabilities existing on the date of marriage. This means any liabilities that you owed separately prior to the marriage and includes credit card debt, mortgages, and car loans.
Once you have determined each spouse’s net family property, you must determine how much one spouse owes the other spouse. To do this, you should:
- Subtract the smaller amount from the larger amount
- Divide by two
The amount that you calculate is known as the “equalization payment,” or the amount that the spouse with the larger share must pay the spouse with the smaller share. This amount may be paid in cash, or by giving the spouse with the smaller share property in the amount of the equalization payment. The manner in which the equalization payment is made is often specified in separation agreements, or by the court presiding over the matter.
The amount of an equalization payment may be reduced if the court finds that such a payment would be unconscionable. While this is rarely done, a court may reduce the equalization payment if the couple was married for a short period of time, or if one spouse purposefully depleted family assets.
Common law couples are not covered by Family Law Act and, accordingly, the above rules only apply to formally married couples. In instances where a couple has cohabited for more than three years and decides to separate, either party may make a “constructive trust” argument for the equal division of property. Such an argument would be that each person contributed substantively to the value of the property, regardless of whether he or she paid for the property or had the property titled in his or her name. If this argument is accepted by the court, one of the parties may be entitled to an equalization payment from the other party. However, this is a more difficult standard than for married couples because the spouse claiming property ownership has the burden of demonstrating that he or she did contribute to the value of the property.
For more information on domestic and other family law matters, please visit MyOntarioDivorce.com or BermanBarristers.com.
Robert Berman B.C.L, LL.B
Founder & Family Law Lawyer