PROPERTY DIVISION ON SEPARATION

On Family Law for residents in Ontario  

Ontario’s Family Law Act provides a formula for the division of the property acquired by the parties during the marriage.  This is called the equalization of net family properties. 

The formula is complicated.   Essentially, the parties “equalize” their net family properties, by way of dividing the difference between the increases in their respective net worth from the date of marriage until the date of separation. 

A person’s Net Family Property is determined by calculating their net worth (assets less liabilities) on the date of separation, less any exclusion (i.e. inheritances, major gifts etc.) less their net worth on the date of marriage.

In order to determine a parties “Net Family Property”, each party completes and swears a Financial Statement in which they list all of the assets that they owned and all of the debts that owed on the date of marriage and on the date of separation (sometimes called the valuation date).  This includes any joint assets and debts. 

There are various exclusions that can be claimed from the determination of a division of net family properties (i.e. the property would not form part of a spouse’s net family property).   Excluded property includes the following:

(a)    property, other than a matrimonial home, acquired by gift or inheritance from a third party;

(b)   income from any inherited property (if specifically stated in a will that it was excluded);

(c)    damages from a personal injury action;

(d)   property that can be traced to inheritances or gifts or damages; and,

(e)    property that the parties have agreed in a Domestic Agreement does not form part of their Net Family Properties. 

Therefore, if you inherited money during the marriage, your spouse may not be able to share these monies with you on the date of separation.  However, the person seeking the exclusion must prove that the monies existed on the date of separation, and can be traced directly to the inheritance.  If the inheritance was placed in a jointly owned bank account prior to the date of separation or paid towards the Matrimonial Home, a spouse would be unable to claim the exclusion.

s. 5 of the Family Law Act provides that a court can award a spouse an “amount that is more or less than half the difference between the net family properties, if the court is of the opinion that equalizing the net family properties would be unconscionable, having regards” to the following:

(a)    a spouse has failed to disclosure to the other spouse debt or other liabilities existing on the date of marriage;

(b)   if one spouse incurs debts recklessly or in bad faith;

(c)    a spouse’s net family property consists of gifts from the other spouse;

(d)   a spouse’s intentional or reckless depletion of his/her net family properties;

(e)    if the parties resided together for less than five years, and the amount of money that the spouse is to receive is disproportionately large compared to the years of cohabitation;

(f)    a written agreement between the parties that is not a domestic Agreement; and,

(g)   any other “circumstances relating to the acquisition, disposition, preservation, maintenance or improvement of property;”

In order to argue that one is entitled to an unequal division of net family properties, the facts of the argument must fall within one of the listed categories.  The onus to prove an unequal division of net family properties is a high one.

Ownership of property

Upon separation, it becomes important to determine who owns what property.  While this may seem simple, it can often become complicated when people are separating and are trying to determine their net worth for the purposes of equalization.  There are three basic rules with respect to ownership of property and they are as follows:

1.      Whatever a person owned prior to the marriage remains the property of the person after marriage;

2.      Whatever a person owned or acquired during the marriage (in their name) belongs to that person after the break down of the marriage; and

3.      Whatever the spouses acquired through their common efforts belongs to both of them.  There may be a possibility that the property is not necessarily shared equally.  It is advisable to meet with an experienced lawyer in order to make a determination of ownership.  

It is important to consult with an experienced family law lawyer who can best determine ownership of property.

Although a party does not “own” a property on the date of separation, it is possible, by using trust arguments, to argue that the other spouse holds the property in trust on behalf of the other spouse.  This is particularly important if the property has increased in value from the date of separation.

Lorne Fine

Lorne J. Fine Law Offices

www.lornefinefamilylaw.com