Property Division
Property division: among the legal rights of married spouses who separate or divorce is the right to share equally in the value of the family property. In family law, this is referred to as an “equalization” of “net family property” (NFP). Each partner’s NFP is, broadly, the value of the property he or she owned on the date of separation, minus debts and excluded property, and minus the net value of the property he or she owned on the date of marriage. Once the NFP is calculated for each spouse, the spouse with the lower NFP is entitled to one-half of the difference between the two amounts. However, the rights of common-law spouses differ from those of legally married spouses.
Division of property for married couples is governed by the Family Law Act in Ontario. Each spouse keeps the property that is in his or her own name, but the value of property acquired by a spouse during the marriage and still held at separation must be shared equally between the spouses.
Spouses will also need to share the rise in the value of the property held by a spouse on the date of marriage. An equalization payment refers to the payment made by one spouse to the other to balance out the sharing of property value between them. It is also known as equalization of net family property.
Law Wise family Lawyers regularly meet with clients who require help figuring out how to split their property upon divorce. In order to ensure that our clients receive their fair share of the family’s assets, we begin each case by facilitating the exchange of financial disclosure between the parties to determine how much each party is entitled to receive.
Exclusions to family property
A few exceptions exist, which are known as excluded property. Gifts or inheritances received during the marriage from anyone other than the spouse are excluded, as are certain insurance payouts, personal injury money and property the spouses have agreed to exclude. It is important to note that the exclusion is lost for gifts or inheritances that have been applied towards the matrimonial home.
Financial Disclosure
Exchanging detailed financial disclosure with your ex-spouse or their lawyer is extremely important, as it provides a framework for determining which of the family’s assets and debts should be split and which should not. The reason for this is that not all property will be subject to sharing between the spouses. For example, if one of the parties receives an inheritance, that money may or may not be excluded from that party’s “net family property,” depending on how the funds were treated. Therefore, there are ways to protect certain funds from being split between the couple upon separation and divorce. Once we determine the amount for equalization for your particular case, we help you negotiate how the property will be divided, according to your goals and interests.
Keep the timeline in mind
If you are contemplating separation and have questions about dividing property, please contact our office to schedule a consultation. At your consultation, you will meet with one of our family lawyers and will receive information on your rights and obligations upon separation or divorce. If you have already separated from or divorced your former spouse, you should seek legal advice immediately, as the Family Law Act limits the time that a former spouse has to make a claim for equalization: generally six years from the day you separated or two years from the day your divorce is final, whichever comes first.
Matrimonial Property
For many couples, the home in which they lived throughout their marriage will be their most valuable asset. The law takes this into account and provides for special treatment of the “matrimonial home.”
At the time of separation, the home in which the legally married couple ordinarily lives is classified as a matrimonial home. It is possible to have more than one matrimonial home; a cottage, for example, may also be one. The full value of the matrimonial home is shared, even if one spouse owned it before the marriage or received it as a gift or inheritance.
In Ontario, married spouses have an equal right to stay in the matrimonial home. The right is valid even if the legal title of the property is in only one of the spouses’ names.
The matrimonial home cannot be sold or mortgaged without the other spouse’s written consent or a court order.
Separation of Common Law relationship
The property-sharing rules for married spouses do not apply to couples in common-law relationships. However, a partner who contributed to property owned by the other partner may have a right to part of it, for example through a trust or unjust enrichment claim, which usually means going to court if the partners cannot agree.
All assets of a partner in a common-law relationship, whether purchased before or during the relationship, generally belong to that partner only. If any asset increases in value during the relationship, the other partner has no automatic right to share in that increase.
Effect of Pre-nuptial agreement on property division
A prenuptial agreement (in Ontario, a marriage contract) between the two spouses will generally be followed at separation, and the division of property will be done as per the terms outlined in the agreement, unless a court sets the agreement aside.
A common law couple can prepare a Cohabitation Agreement and a couple who are married or about to marry can prepare a marriage contract. These agreements outline the terms and conditions for dealing with debts, property and finances during the relationship and how to deal with them in the event of separation. They cannot decide who will have decision-making responsibility or parenting time with respect to the children.
To be valid, the agreement must be in writing and signed by both partners in front of a witness, who must also sign. Each partner should have their own lawyer, and complete financial information should be exchanged before signing.
The court may decline to enforce the agreement, or may change it, if it is evident that one spouse:
- Failed to disclose their complete finances
- Did not understand the agreement, or
- Signed the agreement under pressure
CONTACT US
Law Wise family lawyers in Mississauga, serving Brampton, Toronto and the Greater Toronto Area, can represent you effectively in your property disputes and net family property valuations.