If I could tell you critical information you need to know about what happens to your home in your separation, divorce or family law case, would that interest you?
Usually, the most valuable asset in a marriage is the home you and your spouse purchased in which to live and raise your children.
Picture yourself where you will be in 5 years from now if you don’t have the issues surrounding your home worked out with your former spouse.
In this article, you will discover the key information and advice you need to protect your legal rights about your home in your separation or divorce.
What is the definition of a matrimonial home? The Ontario Family Law Act defines a matrimonial home as “every property in which a person has an interest and that is or, if the spouses have separated, was at the time of separation ordinarily occupied by the person and his or her spouse as their family residence is their matrimonial home.”
An “interest” in the matrimonial home does not necessarily mean that a spouse has to own the property. For example, if spouses are renting an apartment in which they live, then the apartment is a matrimonial home for family law purposes.
The spouses must normally live on the property throughout the year. If spouses spend most of their weekends at a cottage during certain periods during the year, the cottage will qualify as a matrimonial home. Therefore, spouses can have more than one matrimonial home at the time of separation.
What are the consequences of a property being designated as a matrimonial home?
Generally, the property cannot be disposed or encumbered in any manner without the consent of both spouses. In other words, both spouses have to consent to the sale of the matrimonial home. The consent of a spouse to the sale of the matrimonial home is not required if a spouse has released his or her rights in the matrimonial home pursuant to a court order or agreement, such as a separation agreement.
Spouses can designate a property owned by one or both of them as a matrimonial home.
Both spouses have an equal right to possession of a matrimonial home.
As a practical matter, there are generally only two approaches that a spouse can take to the matrimonial home:
(1) The matrimonial home can be sold. The spouses can agree to sell the house in a separation agreement or in a court settlement. When spouses agree to sell the house, they usually agree on how to divide the proceeds.
(2) One spouse agrees to buy out the other spouse’s interest in the matrimonial home.
The key factor to consider in buying out your spouse’s interest in the matrimonial home is whether you can refinance the mortgage. Your spouse will only agree to permit you to buy his or her interest in the matrimonial home if you can discharge or eliminate his obligation to pay under the existing mortgage.
As well, both spouses must agree on a reasonable price for the matrimonial home.
However, your two choices in dealing with your home as described above are part of the important family law process called “equalization of net family properties.”
Get even more important details by reading this article on dealing with your property issues or Ontario property division.
Your home is part of the family law process called equalization of net family properties. Your home is part of the process of dealing with your total property and assets in your family law case.
Click here to get even more information on property division in Ontario.
What exactly does this complicated-sounding process or calculation involve?
Based on Ontario family law, each spouse must calculate or determine their net worth. This means each spouse must calculate the value of their assets, including money in bank accounts, RRSPs, stocks and bonds.
The value of your ownership in your home is part of the value of your assets. If you and your spouse are on title to your home, you would put down fifty per cent of the current value of your home in your calculation of the total value of your assets.Your spouse would also put down fifty percent of the value of your home in his or her calculation of the total value of their assets.
You then must deduct the total amount of your debts from the total value of your assets.
With the exception of the value of your home at its current market price, you calculate the value of your assets and the amount of your debts at the time of the date of your separation from your spouse.
The deduction of your total amount of debts from the total value of your assets equals or amounts to your net worth.
When you have calculated your net worth, you compare your net worth to your spouse’s net worth.
The key Ontario family law principle is that whichever spouse has less net worth than the other spouse is entitled to half the difference.
Let’s use an example to help you see how this important calculation is actually made.
For example, you have a net worth of $500,000 and your spouse has a net worth of $300,000. When you deduct $300,000 from $500,000, your result is $200,000. Then you divide $200,000 in half. Half of $200,000 is $100,000.
You would have to pay $100,000 to your spouse in this example. Therefore, your net worth is reduced by $100,000 to $400,000 and your spouse’s net worth is increased by $100,000 to $400,000. This equalizes the value of each spouse’s net worth at $400,000.
This $100,000 payment is called an equalization payment since it equalizes the net worth of each spouse in a separation or divorce.
If you and your spouse agree to sell your home, your one-half value of your home is part of the total value of your assets and the other one-half value of your home is part of the total value of your spouse’s assets. Then you use the calculation described above to determine the right equalization payment.
When one spouse decides to “buy out” or purchase the other spouse’s one-half value in the home, you usually do the equalization payment calculation by putting the total value of the house in the value of the spouse’s assets who wants to purchase the other spouse’s interest in the home. You also include the total amount of any mortgages or lines of credit in the spouse’s total amount of debts who wants to purchase the other spouse’s interest in the home.
When you include the total value of the home and the total amount of any debts connected to the home, such as a mortgage or line of credit, in your net worth calculation, you are recognizing that you are getting the benefit of the value of this asset and the proper deduction for any money owing on your home in the form of a mortgage.
More importantly, your spouse will usually get paid his one-half net value of the home as part of the equalization calculation and payment made in your case.
Clearly you can see the need to hire an experienced family law and divorce lawyer to help you with this important family law calculation. Call the office of Thomas O’Malley at (905) 434-8837 to protect your family law rights in this important area of your life.
Ontario family law makes some special exceptions for your home.
Normally, you can deduct the value of your assets that you owned on the date of marriage. However, if only your spouse owned the home on the date of marriage, he or she cannot deduct the value of the home prior to the date of marriage. For example, let’s say your spouse owned the home on the date of marriage and the value of the home was $350,000. Now on the date of the separation the home is worth $750,000. Your spouse cannot deduct the $350,000 pre-marital value of the home. He or she must include the whole $750,000 value in their net worth calculation.
You are allowed to exclude the value of any gifts or inheritance you get from the total value of your assets. For example, if you get $50,000 from your father as a gift and you put it in your own bank account separate from your spouse’s bank account, you can exclude this $50,000 from the value of your total assets in determining the equalization payment.
However, if you take the same $50,000 and use it pay down your mortgage or use it as part of a down payment for a new home, this gift loses its protection as an exclusion. It becomes part of the calculation of the total value of your assets.
You and your spouse are both entitled to stay in the matrimonial home during your separation or divorce. You cannot just decide to kick your spouse out of the home. Your spouse is entitled to continue to live in the home as much as you are entitled to live there.
Obviously, when you sell the home, you and your spouse must move out of the home on or before the closing date for the sale of your home.
If you or your spouse has bought out the other spouse’s interest in your home, your spouse must leave or vacate the home on or before a specific date. Usually, you would establish this date in a separation agreement with your former spouse.
Now you can bring court proceedings called exclusive possession of the matrimonial home to ensure that your spouse no longer lives in your home. However, it is a difficult test to meet.
The court considers the following factors to determine whether you can get an order for exclusive possession of the matrimonial home:
(a) the best interests of the children affected;
(b) any existing orders under Part I (Family Property) and any existing support orders or other
enforceable support obligations;
(c) the financial position of both spouses;
(d) any written agreement between the parties;
(e) the availability of other suitable and affordable accommodation; and
(f) any violence committed by a spouse against the other spouse or the children.
The court reviews these two factors in determining the best interests of a child:
(a) the possible disruptive effects on the child of a move to other accommodation; and
(b) the child’s views and preferences, if they can reasonably be ascertained.
When you already own a home, you can avoid the problem of having the value of your home added to the total value of your assets for the purpose of determining an equalization payment.
How do you avoid this problem?
You must negotiate a marriage contract or agreement with your spouse in which you specifically state that the value of your home does not form part of your net family property. If you put this term in a marriage contract with your spouse, the value of your home is excluded from the equalization payment calculation.
You should give serious consideration to negotiating a marriage contract with your spouse to avoid serious issues with your home if you and your spouse do separate in the future.
Are you beginning to see all the problems you face in dealing with your home when you’re getting separated or divorced?
You can either invest in an excellent family law and divorce lawyer now or face some serious problems in dealing with your home in trying to settle your legal issues with your spouse.
The truth is you particularly need an experienced family lawyer to help you deal with your home in your separation or divorce.
Imagine this scenario: You discover the key options in what to do with your home in your separation or divorce and what’s the best option for you to protect your legal rights. Sounds pretty good, doesn’t it?
That’s exactly what you get when you come to your initial consultation with Thomas O’Malley.
Just take a minute to consider how much easier dealing with your home and your separation or divorce will become when you use the advice of Thomas O’Malley, a dedicated and helpful family law and divorce lawyer, to protect your family law rights.
Call Thomas O’Malley today at (905) 434-8837 to start protecting your legal rights about your home so that you can start getting some peace of mind about these complicated legal issues.
You can also get very important information by reading this article on getting the help of an experienced family lawyer to safeguard your legal rights in your separation or divorce.