Assets are a big area of concern when a couple is thinking about separating. Some individuals even think that they are automatically entitled to half of the marital assets.
Property and assets are not physically split in Ontario. Rather what happens is that the net value of all property and assets owned by each spouse is calculated in accordance with a specific method set out by the Family Law Act. Then, typically, a money adjustment, known as an “equalization payment”, is paid by the spouse with the higher net value of property and assets to the spouse with the lower value. The idea is to “equalize” your spouse’s net worth upon separation so that it is equal to your own.
It is only the increase of the net value of your assets during your marriage that is equalized. Subject to certain specified exclusions and one exception, the increase is determined by calculating your assets, less liabilities, on the date of separation and subtracting the value of your assets, less liabilities, on the date of marriage. Look at it as if you were business partners that agreed to share the net proceeds from the sale of your business equally after you each received the amount of money you initially invested in the business upon startup.
Once you and your spouse’s net worth is determined, the spouse with the greater net worth will pay one-half of the difference to the spouse with the lesser net worth so that both spouses are left with the same value of property.
For example, if on the date of separation, after factoring in all the deductions and exclusions allowed for by the Family Law Act, you have a net worth of $100,000.00 and your wife has a net worth of $50,000.00, you will need to pay to your wife or give her assets worth $25,000.00 so that you both end up with a net worth of $75,000.00.
Robert Berman B.C.L, LL.B
Founder & Family Law Lawyer