Under the Family Law Act, assets acquired during the marriage are usually shared equally. The matrimonial home holds unique importance. Both spouses must share its full value, regardless of ownership prior to marriage.

In Ontario, it’s essential to differentiate between married and common-law partners. Married couples have automatic rights to share assets, while common-law partners do not.

 

Family Property and Assets

In Ontario, the division of family property during a divorce involves key rules and exceptions that dictate how assets are shared. Special treatment is given to the matrimonial home, while some assets like inheritances could be excluded from sharing.

Defining Family Property

Family property includes any assets gained by either partner during the marriage. This encompasses money, real estate, and other valuables acquired jointly or individually. Subtracted from this is any debts owed by a partner.

Both partners must declare all their possessions, and debts, at the start and end of the marriage during the financial disclosure of the divorce process. Once all of the values are calculated a spouse’s Net Family Property (NFP) is ascertained. It’s easy to think of an NFP as the “net worth” of a spouse. From there, you compare one spouse’s NFP with the other’s NFP, and the person with the higher NFP has to pay the other an amount to achieve equal NFPs, hence the phrase “equalization”.

The Matrimonial Home

The matrimonial home is given special treatment. At law there are two “parts” of the matrimonial home. The first is the value of the home. The second is the right to continue to reside in the home.

When it comes to value, the full date of separation value for the matrimonial home is included in a person’s net family property calculation. What stands out about the matrimonial home, as compared with every other asset, is that even if one of the spouse’s owned the matrimonial home on the date of marriage, they do not get credit for the value of the home on the date of marriage.

With respect to possession, the Family Law Act is very clear that, if or until the spouses agree, or a court orders it, BOTH spouses have the right to continue to reside in the house. This is different than in some other places.

Excluded Property and Inheritances

Certain properties are not shared between partners. Important exclusions include: 

• Inheritances
• Gifts
• Personal injury settlements

These remain with the original owner unless mixed with family assets (e.g., depositing inheritance money into a joint account). This protection encourages individuals to keep them separate for clarity. 

 

Equalization of Net Family Property

In Ontario, equalization of net family property is a fundamental part of divorce proceedings. This process ensures that both spouses receive a fair share of the wealth accumulated during the marriage. 

Calculating Net Family Property

The calculation of Net Family Property (NFP) starts with determining each spouse’s financial position at the end of the marriage. Assets and liabilities are assessed from the valuation date, typically the date of separation.

To calculate NFP, subtract liabilities from the total value of assets. Then, deduct the value of property that each spouse owned on the date of marriage. This shows how much wealth was accumulated during the marriage. The goal is to ensure both parties understand what needs to be shared, except for some exclusions.

The Equalization Payment Process

Once NFP is determined for both spouses, the next step is the equalization payment process. This requires that the spouse with the higher net family property make a payment to the other to evenly distribute marital property. The payment is half the difference between their NFPs.

This method ensures fairness and can involve various forms of assets, including real estate, savings, and investments. It’s guided by the Family Law Act, which sets the rules and criteria for these payments. Proper legal advice is always recommended to navigate this complex process.

 

Pensions and RRSPs

Pensions and Registered Retirement Savings Plans (RRSPs) commonly represent significant financial assets in many marriages. In Ontario, the value accumulated in RRSPs during the marriage is shared equally between spouses through the equalization process. Accurate assessments of growth and potential tax implications are vital.

There are two types of pensions in Ontario, a defined contribution pension and a defined benefit pension. 

A defined contribution pension is somewhat easy to value, as the calculation reflects the contributions by the employee, the employer, and the market factors that change the value of the pension.

A defined benefit pension is much harder to value. A defined benefit pension guarantees an employee a certain payout upon retirement after taking into account years of service, remuneration levels, and other factors. It is therefore NOT as simple as looking at how much an employee and employer added to the pension. Valuations of this nature require significant analysis which is done by an actuary.

 

Frequently Asked Questions

What are the time limits for division of property in a divorce in Ontario?

In Ontario, an equalization claim for property division must be made before the expiration of the following time periods:

1. Six years from the date of separation;
2. Two years from the date of divorce; or
3. Six months after a spouse’s death.

How is property acquired after separation but before divorce treated in Ontario?

Property acquired after separation is generally not subject to division. However, any increase in the value of jointly owned assets will still be shared equally.

Are assets always divided equally between spouses in an Ontario divorce?

Assets are generally shared equally. However, there are exceptions. These are based on special circumstances, such as significant debt or misconduct by one spouse. However it is extremely rare for a court to order sharing of assets other than 50-50.