Division of property and Equalization of Net Family

Property

The Equalization of Net Family Property (NFP):

In the context of a divorce, the equalization of net family property is the equal division of all assets acquired by two spouses during their marriage, to compensate for the equal contributions of the partners during the marriage. As a spouse, you can calculate your net family property is calculated by adding together your assets and subtracting your debts. There are some special rules surrounding certain property, such as gifts and inheritances and the matrimonial home (see below).1

Determining Net Family Property:

If you wish to apply to determine your net family property, you can do so under s 7(1) of the Family Law Act. Your application for entitlement should contain all property that you wish to be included or excluded in calculating the net family property.

More specifically, S 8(1) of the Family Law Act stipulates that each spouse must file in court and serve a sworn statement detailing:

– The party’s property and debts and other liabilities:

1) at the date of the marriage

2) as of the valuation date (see below) and

3) as of the date of the statement

– Any deductions under the definition of net family property

– Any property to exclude under s 4(2). This section lists several categories of property that are eligible to be excluded from the calculation. For more information, click here.

– All property disposed of during the 2 years preceding the making of the statement, or during the marriage (whichever is shorter)2

Determining the Valuation Date:

The valuation date, according to s 4(1) of the FLA, is the earliest of

1) The date of separation, when there is “no reasonable prospect that they will resume cohabitation). This date is the one most commonly used. If you reconcile briefly with your spouse, this is unlikely to push back the date of separation for 4(1).

2) The date your divorce is granted

3) The date your marriage has declared a nullity

4) The date you or your spouse commences an application based on s 5(3) that is subsequently granted

5) The date you or your spouse dies3

Determining Property under s 4(1):

– Property can include both vested and contingent interests, and both present and future interests. For example, it can include past investments in stock, and can also include funds held in trust to be accessed at a later date.4

Calculating Net Family Property (NFP):

– Subtract date of marriage assets from valuation date assets for each spouse

– Normally, there will be one spouse with a lower NFP and one spouse with a higher NFP5

Calculating an Equalization Payment:

– Subtract the higher NFP from the lower NFP

– This is the amount that the lower NFP spouse will receive from the higher NFP spouse6

Time limits for an Equalization Claim:

A spouse must bring their equalization claim within the earliest of the following timeframes:

1) Six years of the date of separation

2) Two years from the date of divorce

3) Six months from the date of the spouse’s death7

Notable Exceptions to Equalization Payments:

Matrimonial Home: A matrimonial home is any property in which you have an interest and that is currently, or if you and your spouse have separated, was at the time of separation, ordinarily occupied by you and your spouse as the family residence. This can mean more than one property: for example, a family home and a cottage. A matrimonial home can be brought into the marriage by one party or received as an inheritance or gift. The matrimonial home, and any money invested in it, are EXCLUDED from date of marriage assets for your Net Family Property calculations.8

Exceptions to the equalization payment from the valuation day assets under s 4(2) of the Family Law Act:

1) Property (other than a matrimonial home, or money put towards the matrimonial home) acquired by gift or inheritance from either a third party or the other spouse after the date of marriage

2) Income from this property (such as rental payments), where the donor explicitly stated that it is to be excluded from the spouse’s net family property

3) Damages (payments) from a lawsuit arising from pain and suffering

4) Proceeds of life insurance policy, as per the Insurance Act, payable on the death of the life insured

5) Property procured as a result of the funds listed under 1) – 4)

6) Property excluded in a domestic contract

7) Unadjusted pensionable earnings under the Canada Pension Plan9

For advice on how to divide property after your separation or divorce, do not hesitate to consult with one of our Family lawyers. You can reach our office at 905-366-0202 or contact us through our website here.

References:

1 Steps to Justice, “We’re married. How do we divide our property and debts if we separate or divorce?” (31 July 2017) Steps to Justice () [STJ]

2 Smith Law, “Property Division” (23 June 2020) Smith Law [Smith]

3 Smith, supra note 2. 4 Ibid. 5 Ibid. 6 Ibid. 7 STJ, supra note 1. 8 Smith, supra note 2.9 Smith, supra note 2.

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