"How is property divided upon separation?"
Basically, the increase in value of a couple’s assets during marriage is divided equally between the parties. Note: It is not the assets that are divided, but the value of the assets. The specific rules are quite complex, as you will see below.
"What is my ‘net family property’?"
The starting point in calculating how to divide property is for each party to calculate his or her "net family property." A person’s net family property is calculated as follows:
- Calculate the value of all of your assets on your date of separation.
- Deduct the value of all of your liabilities on your date of separation.
- Deduct the value of all of the assets you had on your date of marriage.
- In certain cases, deduct other items, such as life insurance proceeds, gifts from third parties, inheritances and personal injury awards (this is discussed further below).
- Add the value of all of your liabilities on your date of marriage.
This is your "net family property."
"I have calculated my and my spouse’s net family property. What now?"
The law requires the person with the higher net family property to pay his or her spouse an "equalization payment." The equalization payment is half of the difference in value between the two spouses’ net family properties. In other words, the equalization payment is the amount necessary to ensure that both parties have equal net family properties
"What about my matrimonial home?"
The value of the matrimonial home is generally equally, even if it was owned by one party at the beginning of the marriage.
"Do I have to leave my matrimonial home?"
Regardless of who owns it, in Ontario, Canada, both spouses have an equal right to possess the matrimonial home. You need to realise that ownership and possession are different. Therefore, even if you do not own the matrimonial home, the court may allow you to stay in it for awhile, for instance, until your children reach adulthood.
"What items are not included in my ‘net family property’?"
Certain items, such as life insurance proceeds, gifts from third parties, inheritances and personal injury awards, may be excluded from your net family property calculation, if they were received during your marriage. To exclude them from the calculation, (1) you must have kept these items separate from all other property, or (2) you must be able to prove how you have invested these monies.
For instance, if you get a $20,000 inheritance and then invest it in art, your art would not be included in your net family property. The one exception to this rule is investments in your matrimonial home. The value of the matrimonial home must be included in your net family property calculation, even if you used money from life insurance proceeds, inheritances or personal injury awards to pay towards the home.
"Can I reduce the amount of my equalization payment?"
A court will reduce the amount only if it finds that the equalization payment as calculated above would be unconscionable. For example, the court might reduce the payment if the spouses cohabited for less than 5 years — or if one spouse recklessly depleted family assets. However, courts rarely do this.
"After I married, I started and built my own business. What happens to it?"
Your former spouse is entitled to half of the VALUE of the business, but that does not mean half of the business. Depending on the value of the business and the value of your other assets, your lawyer may be able to structure your settlement so that your former spouse does not gain an ownership interest in your business. Even if it is necessary to give your former spouse an ownership interest, normally it is possible to ensure that you still control your business.
"When I retire, I will receive a pension. Do I have to include the value of my pension in my net family property?"
Yes. Pensions can be worth a surprisingly large amount, even though you may still have several years before you retire. In fact, for many couples, a pension is their largest asset after the matrimonial home.
"Do I have to include the value of my degree or licence in my net family property?"
No. However, if your spouse supported you while you were obtaining your degree or licence, your spouse may be granted spousal support.
"What are the tax consequences of an equalization payment?"
Normally, when property is transferred, there are tax consequences. However, there are special rules for equalization payments, provided that the parties meet certain requirements. These requirements can be complicated, however, your lawyer will be able to help you with this.
"I have acquired new property after separation. Is my spouse entitled to a share of this?"
"My partner and I were never married. Am I still entitled to an equalization payment?"
Under current legislation in Ontario, Canada, you are not. In any event, you may still have a claim against your partner’s assets through a principle known as unjust enrichment. That is, the court may find that you have an interest in your partner’s assets or are entitled to compensation simply because you helped your partner acquire them during the course of your cohabitation.
This is a very complicated area of law and you will need legal assistance to determine and secure your rights.
HOW WE CAN HELP YOU
Although property division may seem to be a straightforward mathematical calculation, except in the simplest of cases, numerous disputes can arise. Behrendt Law Chambers has dealt with all of these types of disputes many times.
Date Of Separation In Dispute
In some cases, it’s clear when a relationship has ended – one party may decide to leave the home, or there may be a big fight. However, in many cases, it’s not clear. For instance, a relationship may gradually end over a period of years. For instance, a spouse may move to a different bedroom with the rest of the relationship continuing as before, a couple may eat dinner together less and less frequently, or a couple may gradually spend less and less time together. In these cases, it is difficult to determine what the exact separation date is. Each spouse believes that the relationship ended on a different date, and this can impact the value of the assets dramatically.
Value Of Asset In Dispute
Some assets are easy to value – for instance a bank account. You can tell exactly how much you have in the bank, simply by looking at your bank statement. But many assets are not that easy to value.One common example of this is a pension. Your pension is worth a different amount, depending on when you plan to retire. The earlier you receive your pension, the more valuable it is.
This is because you will be receiving your pension income for a longer period of time. It is common in separations for the spouse who has a pension to argue that he or she planned to work as long as possible – perhaps because they enjoy their job so much. The other spouse then argues no, the pension holder planned to retire as early as possible, because he or she did not like their work and could not wait to spend the rest of their lives golfing. The difference between the two values can be hundreds of thousands of dollars.
Disposition Cost Issues
There are costs to converting property to cash. For instance, there may be tax consequences for cashing in RRSPs, and real estate commissions for selling property. Often the costs of converting property to cash are unclear, and thus are in dispute.
Gifts and Loans
In many cases, a couple has received money from their parents or other family members. When they separate, they dispute whether the money was a gift, or whether it is a loan that needs to be paid back. Often, this is complicated by the fact that family financial transactions are not as formal as ordinary financial transactions.
Who owns what property can play an important role in the division of property. For instance, a home can increase in value tremendously between the time the parties separate, and the time that the property is divided. If the home is in the name of one spouse only, then that spouse gets the entire benefit of the increase in value. By arguing that the other spouse has a constructive trust interest in the home, Behrendt Law Chambers has been successful in getting that increase in value shared with the other spouse.
Property Divided So Children Could Remain in Matrimonial Home
In one case, Behrendt Law Chambers’ client moved out of the matrimonial home. His wife wanted to stay in the home with their children, to minimise the negative impact of the divorce on their children. The house and the mortgage were in both our client’s and his wife’s name. The only way they could have paid off the mortgage would have been to sell the home, which they didn’t want to do. At the same time, we insisted that his client not be responsible for the mortgage. They worked out an agreement in which our client’s wife obtained a new mortgage in her name, and used the funds to pay off the joint mortgage.