What you need to know about property equalization when you separate

How to separate property when you get divorced

Sep 13, 2016

In Ontario, the property equalization of a couple’s assets following a separation is determined by reference to the Family Law Act. Under the Act, the value of all property owned on separation date subject to certain adjustments is calculated for both spouses to determine the net family property of each.  The spouse whose net family property is the lesser of the two is entitled to one half the difference between them.

As a result of the Family Law Act provisions, it does not matter that one spouse acquired more assets or is “wealthier” than the other on marriage breakdown.  The law considers that each spouse contributed equally to the relationship whether financially or otherwise (to child care and household management).

However as movies and television often portray, separation can be complicated.  For example, gifts and inheritances have special rules or treatment in the property equalization process. While it is always best to hire a competent Niagara Family Law lawyer to represent your interests, this blog will examine a couple common scenarios with property and debt on marriage breakdown.

Property Equalization Payments

To determine what equalization is owed following a separation, again the net family property of each spouse must be calculated.  This figure is essentially the value of assets less debts of each spouse on their marriage date subtracted from the value of assets less debts on the date of separation.

For example:

Marriage Day

Husband owned a home worth $200,000
had a savings account with a balance of $3,000
had a ($50,000 mortgage)
had a ($10,000 student loan)
Total $143,000

Wife owned a $5,000 stock portfolio
had a ($3,000 student loan)
Total $2,000

Separation Day

matrimonial home worth $500,000 owned jointly with wife – $250,000 (no mortgage)
$15,000 savings
$5,000 joint bank account with wife
($9,000 credit card debt)
Total $261,000

matrimonial home worth $500,000 owned jointly with husband – $250,000 (no mortgage)
$25,000 stock portfolio 
$5,000 joint bank account with husband
($5,000 credit card debt)
Total $275,000

Net Family Property and Equalization

Husband: $261,000 – $143,000 = $118,000
Wife: $275,000 – $2,000 = $273,000

The husband is entitled to half the difference between the two net family property amounts as equalization. In the above example, that would be ($273,000 – $118,000 ÷ 2) $77,500.

The spouse who must compensate the other may use the following methods: payment of cash, payment by instalments with or without security, or by transfer of property.  It is not unusual for a spouse to transfer his or her interest in the matrimonial home or use his or her sale proceeds from the sale of the home to equalize with the other.  

Who has rights to the Matrimonial Home

Your home is one of the largest assets and sometimes the most difficult to deal with in a separation.  Very often one or both spouses want to stay in the home after the marriage breaks down.  For these and other reasons, there are special rules under the Family Law Act applicable to the matrimonial home.

Both spouses have the right to stay in the home unless they agree or a judge decides otherwise. Neither spouse can rent out the home, sell, sublet or mortgage it without the explicit consent of the other spouse. This is true if the matrimonial home is owned jointly or by just one spouse.  

The factors which may affect exclusive possession of the home are the financial position of the spouses, the best interests of any children in the home, the availability and affordability of alternative accommodation, as well as violence committed by a spouse against the other or the children.  If you cannot agree who stays in the matrimonial home or if it should be sold, Family Law lawyers can help by representing you in negotiations, mediation or court.

This is only a brief look at equalization and the matrimonial home.  Your separation can be difficult and emotionally charged.  

With guidance of a Family Law lawyer, your legal rights will be properly protected.  If you are in the process of separating or are considering it, the professional St. Catharines family lawyers of Chown Cairns are here to assist you. Learn more about our Family Law practice below.