Division of Property & Equalization

Division of property and equalization relates to the assets and liabilities accumulated by the parties during their marriage, collectively called the net family property. The division of Net family property happens upon a dissolution of marriage. Common law spouses may not be able to seek equalization of their net family property except in cases where it can be shown that there is a constructive trust issue or perhaps a joint family venture.  These concepts are usually only applicable to longer term relationships.

Upon marriage breakdown, the triggering event for the divorce process is called the “date of separation” or “valuation date”.  The date of separation is the more commonly used term. This is the date that the parties separated with no possibility of reconciliation.  As “living separate and apart” can look different for different families, sometimes, determining this date can be the cause of litigation.  It is not uncommon for parties to be separated but continuing to live under the same roof.  If the date of separation is unclear, it is determined based on evidence, for example, one spouse left the matrimonial home with a view to live elsewhere or by consent.

The date of separation is the basis for equalization calculations and is the date that the parties are no longer financially tied to each other except for where they have joint rights and obligations.  For example, a joint credit card continues to be a joint debt.

Equalization recognizes both spouses contribution to the marriage.  Marriage is an equal partnership, whether one spouse is responsible for the financial well-being of the family and the other is responsible for the running of the household.  Both contributions are recognized.

To determine equalization, the parties must provide to the other party a sworn financial statement which lists all assets, liabilities, inheritances, gifts, etc. on the date of separation or valuation date.  In addition, all of the parties’ debts and assets from the date of marriage must be listed.  Supporting documentation must be provided as well.

Disputes may arise dealing with the value and ownership of property.  In addition, it is not uncommon for a party to neglect to list assets or to provide adequate value.  It may also be necessary to obtain a preservation order to prevent a party from depleting the family assets prior to the completion of the equalization analysis.  Pensions are also included in the calculation of net family property.  Depending on the type of pension, it may be necessary to engage the services of a pension valuator.  Often due to the complexity of either party’s financial position, forensic accountants may be necessary.  As well, if a party owns a private company, sole proprietorship or partnership, it may be necessary to obtain the services of a Chartered Business Valuator to value the company.

Once each party’s net worth is determined, the party with the higher net worth owes an equalization payment to the party with the lesser net worth such that the parties then each have the same net worth.  This is equalization.. Each spouse may retain their property as long as the value of the property has been included in the equalization calculation.

The longer the marriage and the more prosperous the couple, the more likely it is that determining division of property and equalization will be complicated.  Both parties would probably benefit from legal representation.

At Heft Mediation, we have a network of evaluators and financial experts who we know and trust, and who have many years of experience helping our clients.

The Matrimonial Home

The Family Law Act gives special treatment to the matrimonial home as to how it is treated in the equalization process.  The matrimonial home is defined as all properties ordinarily occupied by the parties as a family residence.  There may be more than one matrimonial home, such as a cottage or vacation condo.

Both parties have a beneficial interest in the matrimonial home even if the title to the matrimonial home is registered in the name of one spouse only.  For this reason, as it is a matrimonial home, neither party can encumber the matrimonial home unless they have the consent of the other.  For example, one party  may not register a line of credit against the home without the other party signing off on it.  This prevents a situation where the non-titled spouse finds themselves having a beneficial interest in a property with no equity because the other spouse has drained it.  It is suggested that if the titled spouse wishes to encumber the matrimonial home, the untitled spouse should obtain independent legal advice.

Even though there is an assumption that the parties both have a beneficial and equal interest in the matrimonial home, the Family Law Act puts some restrictions on this, for example, it may be unconscionable to divide the matrimonial home 50/50.  The most common reason for not dividing the home 50/50 is in the cases of very short term marriages.

One interesting aspect of the matrimonial home and its treatment is when one spouse owned the matrimonial home prior to the marriage and then this home was sold during the marriage to be replaced by a new matrimonial home. Therefore, this first property ceases to be a matrimonial home and the new  home is purchased during the marriage becomes the new matrimonial home.  In this case, the party who owned the home on the date of marriage will get a date of marriage deduction for the asset that was brought into the marriage whereas if the  parties were living in the same matrimonial home from the date of marriage to the date of separation, the matrimonial home would not be a date of marriage deduction.  This can have a profound effect on equalization.

If the title to a matrimonial home is in one spouse’s name only, then the other spouse’s interest in the matrimonial home ceases on the date of separation. It will be the value of the matrimonial home on the date of separation that is the basis for the equalization calculation.  If the matrimonial home were to increase in value from the date of separation until the date the parties settle their issues, the party who is not on title will not participate in the increase.  Of course, there are exceptions.

Both spouses have possessory rights, that is, notwithstanding whose name is on title, both spouses are entitled to possession.  Both spouses have the right to stay in the home.  This can lead to separated spouses living separate and apart but under the same roof.

It is possible for one spouse to apply for exclusive possession of the matrimonial home, on a temporary or permanent basis, meaning other spouse may have to vacate.  There are factors that the court will look at to make this determination including, but not limited to, the best interests of the children, the means of the spouse who will be vacating, the availability of other suitable accommodations and the financial position of both spouses.  A party will often be granted exclusive possession of the matrimonial home in cases where there is violence.

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