The Whitby family lawyers at M. G. Michaels & Associates can help you and your spouse to divide up the property and financial assets the two of you accumulated during the marriage. Canadian law presumes an equal partnership in your marriage, so upon marriage breakdown, family property is equalized, meaning divided equally to reflect the presumptive equal partnership you shared during the marriage.

How is ‘Marital Property’ Defined in Ontario?

A necessary but often difficult and confusing step at the end of a marriage involves dividing your property and finances. At M. G. Michaels & Associates, our experience and strong negotiating skills can help you divide the family’s assets and debts, to separate financially from your spouse.

It is important to remember that common law partners do not have the same rights as married spouses upon separation. You can learn more about the rights of common law spouses to property division by reading Common Law Separation.

Our Whitby family lawyers will examine a number of issues concerning dividing property, as defined by Ontario family law, including, but not limited to:

• The matrimonial home and other real estate assets
• Pensions, RRSPs, LIRAs and other investment accounts – Read our Article, How Pensions are Valued
• Complex marital assets of high net worth individuals such as shares, foreign holdings
• The issues concerning self-employment income or investment income
• The interests in family-owned businesses and business valuations
• Family trusts, other trusts and estate freezes
• The equalization of Net Family Property, including determination of property that should be excluded such as inheritances, gifts, certain lawsuit awards as well as assets or debts brought into the marriage
• The effects of property division on Spousal Support – not infrequently, when a couple of modest means and/or low income separates, the payor may not have enough financial resources for both child support and spousal support. In these situations, the Courts must give priority to child support.

What Are Equalization Payments Under The Family Law Act?

Under the Family Law Act, R.S.O. 1990, c. F.3, each spouse is required to determine their net worth at the date of separation, subject to certain exceptions, and then either transfer property or receive property from the other spouse so that both spouses then have an equal net worth. This process is called Equalizing the Net Family Property.

When we talk about equalizing property, we don’t just mean real estate. We mean bank accounts, Canada Savings Bonds, cars, SkiDoos, boats and trailers, jewellery, RRSPs, whole life insurance policy cash surrender value, and other assets, but we do not equalize them item by item.

Of course, we need to subtract our debts from those assets to determine our net worth, called Net Family Property.

What is Excluded from Net Family Property?

Certain types of property and assets might be excluded from the calculation of net family property. For example, personal injury awards (such after a motor vehicle accident, or a slip and fall), proceeds of life insurance policies, and inheritances or gifts from third parties will generally be excluded.

Importantly, if you can prove your net worth at the date of marriage, that could also be excluded (although any increase in the value of the property owned on the date of marriage is subject to division).

How to Value a Business During Divorce, for Equalization Purposes

What happens if one of the spouses is a business owner? How do you split a business? It is the clear intention of the law that Judges are supposed to avoid making a Court Order that would result in the sale of an operating business to pay an equalization payment, unless there is no reasonable alternative.

The Court therefore, may order that one spouse pay the other a share of the profits from the business, or order that one spouse transfer, or have the corporation issue to the other spouse, shares in the corporation. Thus, profits that would ordinarily be retained in the partnership to meet working capital requirements may have to be paid out to the spouse of a partner, and shareholders may have to share their voting and other power with an unwanted spouse.

A good shareholder agreement should require that a shareholder be bought out in the event that their spouse makes a claim for an equalization payment under the Act. In this way, the separated shareholder would receive funds to help satisfy the spouse’s claim in exchange for shares in the business, and the remaining shareholders could continue operating the business free of interruption by the non-shareholding spouse. However, that type of agreement would have been negotiated by the shareholders at the inception of the business, and not the end of a marriage.

The Family Law Act can also be triggered when one spouse dies but had a Will leaving the other spouse out as a beneficiary. The Act allows the surviving spouse to trigger (fake with the approval of the law) a marriage breakdown/separation the day before their spouse’s death, ensuring that the surviving spouse receives no less than an equal sharing of their combined net worth. However, the surviving spouse can also opt to receive under the Will (if it is more favourable to them) or an intestacy (where there is no Will) if that is more favourable. But there is a short time limitation involved so the need to consult with a lawyer is urgent.

The parties to a marriage are free to exclude the operation of the Family Law Act by entering into a marriage contract or prenuptial agreement. For example, to prevent a spouse from becoming entitled to a share of the profits of a partnership, or from becoming a shareholder in a corporation, all the partners or shareholders should sign marriage contracts in which their spouses have agreed to forego such rights. Visit Cohabitation Agreements, Marriage Contracts and, Prenuptial Agreements to learn more.

Legal Test for Matrimonial Home

The full value of the matrimonial home or homes is always included in the value of property owned at the date of separation. Unfortunately, the law does not permit a spouse to deduct that value if they owned it before the marriage, but they still live there at the date of separation.

On the other hand, if the spouse who owned a property prior to marriage and lived there as a married couple during the marriage, but later sold it prior to separation, the law no longer considers it to be a matrimonial home at the date of separation so that spouse is entitled to exclude the value of the equity in that property from the net worth at separation.

What is, or is not, a matrimonial home can be confusing to non-lawyers, as can the fact that a couple can own more than one matrimonial home. You will hear the phrase “habitually resident” and that can apply to a principal residence such as a house where you live most of the year, as well as a cottage where you spend summers or summer weekends, or a vacation condo in the Caribbean or a timeshare. Each of those must be examined to determine if they are a matrimonial home or not.

In certain limited circumstances, the Court has discretion to award one spouse more or less than half the difference as calculated above. However, the test is a stringent one and cannot be met in most cases. It is wise to consult a Whitby family lawyer at M. G. Michaels & Associates about issues about the matrimonial home and the best way forward.

Contact the Whitby Family Lawyers at M. G. Michaels & Associates 

Let the Whitby family lawyers at M. G. Michaels & Associates help you determine the division of Net Family Property, especially if it includes real estate including offshore real estate, investment accounts, a family business (or shares or an interest in a business) or a family trust.

Contact us now by email or phone, to learn more about division of Net Family Property.