Executive Summary
Matrimonial property division attempts to split gains in the net worth of spouses in half. It is only applicable to married, and not common law couples.
First you calculate each party’s change in networth over the duration of the marriage. Next you subtract the lesser change in networth from the greater. Finally, you divide this number in half and the spouse with the greater change in net worth makes a payment for this amount to the other spouse.
Matrimonial property division can be one of the most complex areas of a divorce depending on the extent of the assets which the parties own. Choose a family lawyer to handle your divorce and matrimonial property division.
How to prepare for matrimonial property division:
Each spouse has to know:
- The date of marriage; and
- The date of separation.
The courts are only concerned with the change in networth which occurred during this time period. Because you were married during this time period, the presumption is that you each contributed equally (50-50) to the each other’s networth. This same presumption does not exist for common law spouses.
Once you know these two dates, each spouse will proceed to obtain financial documents supporting and disclosing their networth at each of those two dates. Your family lawyer will help you identify which assets are to be included in the calculation and which assets are to be excluded. You will then fill out a financial statement (one of the standard court forms). You would use form 13.1 for matrimonial property division. You will provide your spouse with the financial statement and the supporting documents.
You will obtain a copy of your spouse’s financial statement and supporting documents. Your divorce lawyer can help you comb through this information to ensure that your spouse is disclosing all of their assets. Once you obtain all this information, you can then begin to calculate the change in net worth of the parties during the time of their marriage.
First you have to calculate each spouse’s change in net worth from the date of marriage to the date of separation. Once you have calculated these values, you subtract the lesser net worth from the greater networth. You then split this number in half. The spouse with the greater change in net worth makes a payment for this amount to the other spouse.
Additional Matrimonial Proerty Division Information
The substantive law behind property division is found in the Family Law Act. The procedural law is found in the Family Law Rules.
The Supreme Court of Canada views marriage as a partnership. The default position of the Ontario Courts is that each spouse contributed equally to the accumulation of debts and assets during the marriage. When you divorce, you have to split the net value of your family property 50-50.
The Family Law Act quantifies how much you owe through a “net family equalization” payment. When one spouse has less than half of the net family property, they receive an equalization payment from the other spouse.
The payment can be accomplished by the sale of assets and transfer of the proceeds, or by transferring assets to the other spouse. In out-of-court settlements, you can decide who keeps which assets, and structure tax-effective settlements to maximize your wealth. In contrast, if you go to court, judges aren’t concerned with the tax-effects of property division and how much wealth is kept after paying taxes.
The value of assets or debts is determined on the “valuation date” which is usually the date of separation, and not the date of divorce. The valuation date is important because the value of assets or debts can change abruptly, affecting the equalization payment greatly.
The equalization calculations are complex and require full financial disclosure between the parties. Both parties will need to disclose all assets and debts accumulated during and before the marriage.
Assets include: real estate, household items, cars, antiques, art, jewellery, bank accounts, RRSP, RESP, investments, stocks, pensions, life insurance, businesses, intellectual property, and even pets. In some cases, it is necessary to retain a financial professional to value assets and obtain tax advice. This is true where there are: complex corporations or partnership structures, contingent assets, pensions, and hard-to-value personal property.
Debts include: business and investment loans, credit cards, personal lines of credit, mortgages, co-signed loans, student loans, and family loans.
After totaling all assets and debts (on the valuation date), you may claim a deduction for all debts and assets that were brought into the marriage (valued on the date of marriage). If you brought the matrimonial home into the marriage, it is not deductible.
The following asset are excluded from the equalization calculation: gifts, inheritances, income derived from gifts or inheritances, certain tort damages, life insurance proceeds, traceable property, and property which has been excluded in a domestic contract.
Each asset which is included in the calculations should be considered in light of its disposition fees. The value of an asset is decreased by the costs of the disposition fees.
Matrimonial Home
We are often asked about the matrimonial home. Upon separation, both married spouses have an equal claim to possession of the matrimonial home. This means you cannot lock out your spouse.
The value of the matrimonial home is split 50-50 in the equalization calculation, regardless of which spouse is on title, and regardless of any spouse’s contributions to the home. This is done even if one spouse brought a 100% paid off matrimonial home into the marriage.