As you start reading the beginning of this article, you’ll find yourself amazed at the key information you need to know to deal with division of your property and assets in Ontario with the end of your marriage in your separation or divorce.
You get an important summary about property or asset division in a divorce in the first few sections of this article.
You get more in-depth step-by-step information on division of property or assets in a divorce or marriage based on Ontario family law in the rest of this important article.
Property issues are treated differently in Ontario depending on whether you are married or you were living in a common law relationship with your spouse.
Clearly you must have the assistance of a very experienced family law and divorce lawyer to help you sort out these difficult property and asset issues in your case. When you come to your first meeting with Thomas O’Malley, a dedicated and skilled family lawyer, he will give you excellent family law advice to help protect your legal rights about your property and assets.
Schedule a meeting with him by call his office at (905) 434-8837 now to start protect your family law rights. Don’t be left behind!
When you are married in Ontario and you get separated from your spouse, you must deal with your home, bank accounts, investments and other property as part of your separation or divorce.
Ontario family law has a very specific formula for dealing with property division. In a nutshell, the formula states that the spouse who has a lower net worth is entitled to get half of the value of the difference in the net worth between the two spouses. That sounds like a mouthful and it is.
Here’s an easy example:
If the husband has a net worth of $200,000 and the wife has a net worth of $100,000, the husband must pay $50,000 to the wife. This $50,000 is half of the value of the difference in the net worth of the two spouses in this example. Specifically, deduct the wife’s net worth of $100,000 from the husband’s net worth of $200,000 and the result is $100,000. Then you divide the $100,000 by 2 which equals $50,000. This $50,000 is called an equalization payment.
This example is a very simple case. You need proper legal advice from an experienced family law and divorce lawyer to make sure you calculate or determine the proper equalization payment in your case.
There are many other details you need to use to get the right calculation for property equalization in your case.
For example, you get to deduct the net worth of your assets that you owned on the date of marriage in determining the equalization payment. You must also make sure you deduct your debts or liabilities that you have on your date of separation to calculate your net worth.
You can see how determining property division can become very complicated very quickly.
Another important exception is that you cannot deduct the value of the matrimonial home if you owned the same home both on the date of marriage and the date of separation.
You must make sure you get a proper pension valuation when you spouse has a traditional pension with their employer.
There are many steps to this complicated property division process in Ontario for married spouses.
You cannot make an equalization claim when you are not married to your spouse. However, you can make a claim against your spouse if you have made contributions to your residence, for example, and you are not title to this property.
Again, you must see an experienced family law and divorce lawyer to understand and protect your property rights when you are living in a common law relationship.
Discover key information about your rights in a common law relationship by reviewing this article.
Just imagine how much easier your life will become when you use Thomas O’Malley, a veteran family law and divorce lawyer, to protect your property rights in your separation or divorce.
As a matter of fact, you’ll know right from the start how to protect your family law rights when you come to your first meeting with Mr. O’Malley. But more importantly, you won’t lose any more sleep over how to get a fair and reasonable settlement that solves your family law issues so that you can move on with your life.
It’s a nice feeling to finally be able to let go of some of your worries and concerns about your separation or divorce when you have a top-notch family lawyer working for you to protect your legal rights, isn’t it? Don’t settle for anything less.
Call Thomas O’Malley now at (905) 434-8837 to set up your first meeting to find out how to protect your family law rights. It’s time for action. Call today!
Property rights and claims in family law is probably one of the most misunderstood areas of family law. This article on property division in Ontario will make sure that you understand the fundamentals of making a property claim in your separation or divorce. You will no longer have to scratch your head about the property issues.
You can only make a property claim under the Ontario Family Law Act when you are married to your spouse. This is called a claim for what is called an equalization payment. People who live common-law or who are not married cannot make a property claim under the Family Law Act for an equalization payment. They have a more difficult claim for property based on the concept of constructive trust, resulting trust and unjust enrichment which will be discussed later.
You face an important time limit on making a property claim application under the Ontario Family Law Act. You must bring a property claim application before the earliest of,
(1) two years after the day the marriage is terminated by divorce or judgment of nullity;
(2) six years after the day the spouses separate and there is no reasonable prospect they will resume cohabitation;
(3) six months’ after the first spouse’s death.
You have to make sure you make an application to deal with your property claim before the time limit expires. If you make an application for your property claim and the time limit has expired, the court will not let you proceed with your property claim. Check your separation date now to make sure that you still have time to make your property claim.
There is a specific legal formula to determine your property claim under the Ontario Family Law Act. The specific legal formula is the following:
This legal formula involves these following steps: (1) you and your spouse have to calculate or figure out your individual net family property (the concept of net family property will be discussed shortly), (2) the spouse whose net family property is less than the net family property of the other spouse will receive one-half the difference in the value between the two net family property values.
For example, if your spouse has a net family property of $120,000 and your net family property is $100,000, your spouse would owe you $10,000. The $10,000 amount is calculated by deducting $100,000 from $120,000 which equals $20,000. Then you divide $20,000 by 2 which equals $10,000. By paying you $10,000, your spouse’s net family property will be $110,000 and your net family property will be $110,000.
The payment of $10,000 to you will equalize the net family property between you and your spouse. This is why the $10,000 payment is called an equalization payment.
The calculation of your net family property is critical to determine whether you have to pay an equalization payment to your spouse or whether you will receive an equalization payment from your spouse.
The Ontario Family Law Act defines “net family property” as the following:
(a) the spouse’s debts and other liabilities, and
(b) the value of property, other than a matrimonial home, that the spouse owned on the date of marriage, after deducting the spouse’s debts and other liabilities, calculated as of the date of marriage.
According to section 4(2) of the Ontario Family Law Act, the value of the following property that a spouse owns on the valuation date is excluded or does not form part of the spouse’s net family property:
The calculation of a spouse’s net family property really involves a four-step formula:
(1) calculate the value of a spouse’s property on valuation date (the valuation date is, for most practical purposes, the actual date spouses separated);
(2) deduct the value of all debts and liabilities of a spouse on valuation date from the value of the spouse’s property;
(3) deduct the value of all property, other than a matrimonial home, owned by a spouse on the date of marriage after deducting all debts and liabilities owed by a spouse on the date of marriage, from the value of the spouse’s property;
(4) and exclude the value of all property set out in section 4(2) of the Ontario Family Law Act listed above.
An example of how to calculate your net family property will show you that this is not as difficult as it looks.
The first step is to calculate the value of a spouse’s property on valuation date. In this example, John is a joint owner of the matrimonial home with his wife on the date that John and his wife separated (the valuation date for the purposes of this example). The matrimonial home has a value of $150,000. His interest in the home is $75,000 since he is a joint owner of the home.
The matrimonial home was bought after John and his wife married. John has a pension valued at $60,000. He has one RRSP worth $15,000 and another RRSP worth $20,000. John’s total assets at the date of separation are $170,000.
The second step involves calculating the value of all debts and liabilities of a spouse on the valuation date which is the date of separation in this example. John has a number of debts at the date of separation. The mortgage on the house is $110,000. This is a joint debt since both John and his wife are on the mortgage. Therefore, John’s portion of the mortgage debt is $55,000. He has a car loan of $15,000. He also has total credit card debt of $6,500. He has another loan of $10,000. John’s total debt at the date of separation is $86,500.
The third step involves calculating the value of a spouse’s property, other than a matrimonial home, owned by a spouse on the date of marriage after deducting all debts and liabilities owned by a spouse on the date of marriage, from the value of the spouse’s property. John had assets of $12,000 at the date of marriage. He also had debts of $4,000 at the date of marriage. Therefore, the value of John’s property on the date of marriage after deducting his debts on the date of marriage is $8,000.
The fourth step involves excluding the value of all property set out in section 4(2) of the Ontario Family Law Act, such as gifts or inheritances given to a spouse after the date of marriage. In this example, John received an inheritance from his uncle in the amount of $25,000. This inheritance of $25,000 from his uncle is excluded from the calculation of John’s net family property.
How do we exactly calculate John’s net family property? First, John’s total assets on the valuation date are worth $170,000. Next, you have to deduct the value of John’s total debts and liabilities on the valuation date. His total debts on the valuation date is $86,500. Therefore, deduct $86,500 from $170,000, the value of his total assets on valuation date which equals $83,500. Then, you have to deduct the value of John’s property on the date of marriage after deducting his debts on the date of marriage from $83,500. Therefore, deduct $8,000 from $83,500 which equals $75,500.
John’s inheritance of $25,000 is excluded from the calculation of his net family property. Therefore, this figure is not included in the net family property calculation.
John’s net family property, therefore, is $75,500.
Now, you have to look at the calculation of the net family property of John’s wife, Susan.
Susan’s total assets on date of separation, the valuation date, are her one-half interest in the matrimonial home ($75,000), her small pension (valuated at $10,000), and one RRSP ($5,000). Her total assets on the valuation date are worth $90,000.
Susan’s total debts and liabilities on the valuation date are portion of the mortgage ($55,000), her credit card debt ($7,500) and her small loan ($2,000). Her total debts on the valuation date is $64,500.
Susan owned assets worth $3,000 on the date of marriage. Her debts on the date of marriage was $500. Therefore, the value of her property on the date of marriage after deducting her debts and liabilities on the debt of marriage is $2,500.
Susan has no property to exclude under section 4(2) of the Ontario Family Law Act from the calculation of her net family property.
How do you specifically calculate Susan’s net family property? Her total assets on the valuation date are worth $90,000. You have to deduct $64,500, Susan’s total debts on the valuation date, from $90,000, which equals $25,500. Then, you deduct $2,500, the value of her property on the date of marriage after deducting her debts and liabilities on the date of marriage, from $25,500, which equals $23,300. Susan has no exclusion of any property from her net family property calculation.
Susan’s net family property, therefore, amounts to $23,300.
When you have calculated John’s net family property and Susan’s net family property, you now figure out whether John or Susan owes his or her spouse an equalization payment.
How do you calculate the equalization payment in this example? The legal formula is that the spouse whose net family property is the lesser of the two net family properties is entitled to one-half the difference between them. John’s net family property is $75,500 and Susan’s net family property is $23,300. Therefore, John will owe an equalization payment to Susan since his net family property is higher than Susan’s net family property.
The actual amount of the equalization payment is calculated as follows: deduct Susan’s net family property from John’s net family property and divide by 2. Therefore, deduct $23,300, Susan’s net family property, from $75,500, John’s net family property, which equals $52,200. Then, divide $52,200 by 2, which equals $26,100. The equalization payment is $26,100. John must pay this equalization payment of $26,100 to Susan.
You can now see the importance of full financial disclosure so that you can calculate your net family property and your spouse’s net family property. You can only figure out whether you will receive an equalization payment or whether you have to pay an equalization payment to your spouse by accurately completing your financial statement and getting your spouse’s financial statement.
Getting full financial disclosure from your spouse can never be emphasized too much. You will never know about what the proper equalization payment is without full financial disclosure.
You and your spouse have to calculate your net family property to figure out the equalization payment. However, what date do you use to calculate your net family property? You have to use the valuation date to calculate your net family property. The valuation date means the earliest of the following dates:
(1) The date the spouses separate and there is no reasonable prospect that they will resume cohabitation.
(2) The date a divorce is granted.
(3) The date the marriage is declared a nullity.
(4) The date one of the spouses commences an application based on section 5(3) of the Ontario Family Law Act (improvident depletion) that is subsequently granted.
(5) The date before the date on which one of the spouses dies leaving the other spouse surviving.
In most cases, the valuation date will be the date of separation. Most spouses separate before they get a divorce order or their marriage is declared a nullity.
When are spouses deemed to be separated for purposes of calculating net family property? The court will first look at when the spouses started to live separate and apart. The court will examine such factors as whether one spouse has moved out of the family residence or whether the spouses have been living in separate bedrooms in the family house. The court will also look at whether the spouses have had any type of a sexual relationship. The more the spouses have lived separated lives and have stopped having a sexual relationship, the more likely the court will find that the spouses have lived separate and apart.
For example, in one case, the spouses had continued to live in the family home. However, the spouses had minimal involvement with each other for a number of months. The spouses only communicated by notes and each spouse had hired a family law lawyer to deal with their situation. The court found that the spouses had separated when they started to have minimal involvement with each other even though they still lived in the same house.
In contrast, the court found in another case that the spouses had not separated even though the husband lived in the basement and the wife lived in another part of the family home. The spouses continued to have sexual relations and went to various social functions and events together even though the spouses did not sleep in the same bedroom.
The court must also find that there is no reasonable prospect that the spouses will resume cohabitation or live together again. If the spouses are physically separate but they are still attempting any form of reconciliation, the court will not find that the spouses have separated until the spouses have stopped trying to reconcile. However, if one spouse is trying to reconcile or get back together with the other spouse and the other spouse does not want to reconcile, the court will find that the spouses have separated.
The other possible valuation dates involve improvident depletion and death. If one spouse, while the spouses are still living together, starts a court application on the basis that the other spouse may seriously reduce the value of his or her assets or property and the application is granted, the valuation date is the date that the spouse started the court application.
When there is no marriage breakdown, the other possible valuation date is the date before the date on which one of the spouses dies while the other spouse is still alive.
Your spouse must list every type of property that he or she owns. Property includes every type of personal property and real property or real estate. If your spouse has any type of ownership in any type of property, your spouse must reveal this. Property really includes practically anything that has commercial value-anything that can be bought or sold. This includes any interest in any type of business, stocks, bonds, mutual funds, copyrights, trademarks, inventions.
Your spouse’s pension with his or her employer forms part of your spouse’s net family property. If your spouse has been with a company for a number of years, your spouse’s pension could be worth thousands of dollars.
Significantly, the courts have concluded that a professional licence and degree, such a medical degree or a law degree, do not fall within the definition of “property” for the purpose of calculating a spouse’s net family property.
The second step in calculating your net family property is the deduction of all debts and liabilities that you have on valuation date.
You should claim every debt and liability that you have to reduce your net family property. The lower your net family property, the better it is for you whether you will be paying an equalization payment to your spouse or you will be receiving an equalization payment from your spouse.
For example, Jack’s assets on the valuation date are worth $140,000. His debts on the valuation date amount to $60,000. There are no other deductions. Therefore, his net family property is $80,000. Jack’s wife, Heather, has net family property worth $30,000. Jack’s equalization payment to Heather is $25,000 (($80,000-$30,000) divided by 2).
However, if Jack’s debts are even higher on the valuation date, his net family property will be lower than $80,000. For example, Jack’s total debts on the valuation date amounts to $100,000. His net family property is now $40,000 ($140,000-$100,000). Jack’s equalization payment to Heather is now $5,000 (($40,000-$30,000) divided by 2). The big difference in the equalization payment is that Jack’s debt on the valuation date are much higher in this second example.
You can also see that the payment you receive will increase, the lower your net family property. Your net family property will be lower, the greater the amount of debts that you deduct from the assets that you own on the valuation date. For example, if your net family property is $65,000 and your spouse’s net family property is $100,000, your equalization payment is $17,500. However, if your net family property is $55,000 and your spouse’s net family property is $100,000, your equalization payment is $22,500.
You should carefully examine your financial situation on the valuation date and list every debt and liability that you have on the valuation date. Common debts include the mortgage debt, loans, including car loans, and credit card debts.
You can deduct outstanding income tax liabilities from your net family property.
You should also remember to deduct tax liabilities for any asset on which you have to pay tax when you sell the asset or dispose of the asset. In other words, you only want to use the “after-tax” value of an asset. The after-tax value is especially important when you value assets such as RRSPs.
In one case, the RRSP had $63,000 in funds. However, the RRSP was only valued at $44,100 since the value of the RRSP was discounted by 30% to take into account the tax liabilities when a spouse cashed in the RRSP.
To claim an after-tax value for an asset in order to lower the actual value of the asset, you must meet two criteria: (1) evidence that the asset will be disposed of on a particular date and (2) evidence that the asset will attract tax consequences or costs when the spouse disposes of the asset or the spouse is deemed to dispose of the asset.
You can also deduct the costs for disposing of property when you can show that the sale or transfer of the property will occur in the future. For example, the court in one case permitted a real estate agent’s commission of 5% and legal fees of $1,000 to reduce the actual value of the matrimonial home for purposes of calculating the spouse’s net family property when the spouse proved that the matrimonial home would have to be sold to get the proceeds from the sale of the matrimonial home to pay the equalization payment.
The next step in calculating your net family property is to deduct the value of all your property, other than a matrimonial home, owned by you on the date of marriage after deducting all debts and liabilities owed by you on the date of marriage, from the value of your property on valuation date.
You should spend the time necessary to figure out exactly what assets and property you owned on the date of marriage as well as your debts and liabilities on the date of marriage. Some people forget about certain assets that they owned on the date of marriage which would have helped them reduce their net family property.
An important exception to the marriage-date deduction is the matrimonial home. If you own a home on the date of marriage and you and your spouse continue to live in this home, which has become the matrimonial home, until the date of separation, you cannot deduct the value of the matrimonial home from your net family property.
However, if you own a home on the date of marriage and you sell this home at a later date and you move into another house, which becomes the matrimonial home, with your spouse, you can deduct the value of the home that you owned on the date of marriage from your net family property. The house that you owned on the date of marriage was the matrimonial home for a period of time; however, this was not the home that you and your spouse ordinarily occupied on the date of separation. Therefore, you can deduct its value in calculating your net family property.
The final step in calculating your net family property is to make sure you exclude the value of all property set out in section 4(2) of the Ontario Family Law Act from your net family property calculation.
The most commonly used exclusion is property, other than a matrimonial home, that was acquired by gift or inheritance from a third party after the date of marriage.
It is important to realize the distinction between gifts and inheritances that you received prior to the date of marriage and gifts and inheritances that you received after the date of marriage.
If you owned a gift that you received prior to marriage and you still own this gift on the valuation date, you can only deduct the value of the gift on the date of marriage. You still have to include this gift that you owned on the valuation date as part of your total property value on the valuation date. In other words, if the value of the gift increased from the date of marriage to the valuation date, you have to include the increase in the value of the gift in your net family property.
In contrast, you can exclude the total value of any gift or inheritance that you received after the date of marriage. For example, if you inherited a coin collection worth $5,000 after the date of marriage and it is worth $15,000 on the valuation date, the $15,000 value of the coin collection is excluded from your net family property.
You can only exclude the income from a gift or inheritance that you received after the date of marriage when the person who gave you the gift or inheritance has expressly stated that the income from the gift or inheritance is to be excluded from your net family property. For example, if a person is giving you certain property in his or her will, the person has to state specifically in the will that the income from the property is to be excluded from your net family property.
You can exclude the damages or funds or right to damages for personal injuries, nervous shock, mental distress or loss of guidance, care and companionship, or part of a settlement that represents those damages.
You can exclude proceeds or a right to proceeds of a life insurance policy that are payable on the death of the life insured.
You can also exclude property, other than a matrimonial home, into which property described in the previous exclusions, such as funds paid for damages for personal injuries, can be traced.
Significantly, you can state in a prenuptial agreement that any property that you wish to be is excluded from the calculation of your net family property.
If you have significant assets and property that you accumulated before you married your spouse, you should give serious consideration to asking your spouse to sign a prenuptial agreement that these assets and property are excluded from your net family property.
By excluding these assets and property from your net family property, you can ensure that any increase in value of these assets and property is not included in the value of your net family property.
If you fail to have a prenuptial agreement that excludes these assets and property from your net family property, you can only deduct the value of these assets and property at the date of marriage. Your spouse will share in the increase in value in these assets and property in these circumstances.
I don’t have to tell you that you must get the help of an experienced family law and divorce lawyer to help you determine the right division of property in your separation, divorce or family court case.
Just imagine trying to figure out this complicated process without the assistance of a skilled family lawyer!
After you come to your initial consultation with Thomas O’Malley, a skilled and experienced family law lawyer, you will understand exactly how to protect your legal rights for the division of property or assets in your family law case based on Ontario law.
Naturally you can see how using the services of Mr. O’Malley will help you settle your family law issues with your former spouse, especially the complicated issue of the division of property or assets.
Contact his office today at (905) 434-8837 to get the effective and reliable family law advice you need to safeguard your legal rights and solve your separation or divorce legal issues.