Among the many issues to be addressed in any divorce process is the division of the couple’s belongings or in technical words, the distribution of the marital property. But what exactly is marital property, and what does it has to do with my divorce?
When a marriage ends, each person’s equal contribution to the family property is recognized. The law provides that the value of any property acquired by a spouse during the marriage period and which still exists at the time of separation must be shared equally between the spouses. Besides, any increase in the value of property owned by a spouse at the time of the marriage must be shared. The payment that must be made to one of the spouses to affect this partition is called an equalization payment or an equalization of net family property.
There are a few possible exceptions to these rules, called excluded property, which may include gifts or inheritances received during the marriage and received from someone other than the spouse, provided that these gifts or bequests have not been used for the matrimonial home.
There are some recommended ways to handle gifts or inheritances if they must make it to the list of excluded properties.
Opt for an Option that Protects Inheritance
The spouses have several options to protect their excluded assets before or during the marriage, in particular by going before the attorney to draw up a marriage contract. They may, during the celebration of the marriage, first pass before a notary to draw up a marriage contract.
They can then opt for the separation of property regime, which will allow each of the spouses to retain ownership of the property that they have acquired alone with their own funds, before or during the marriage. As for the goods purchased by the two spouses, they will belong to them in proportion to the shares acquired corresponding to the contributions of each.
The change in the matrimonial property regime requires the consent of both spouses; it is a possible option when the spouses agree, in particular, in the context of a divorce by mutual consent. They can also change their matrimonial regime during the marriage, but in this case, the previous matrimonial law must have been applied for two consecutive years before the spouses can change it.
Keep all excluded properties exclusive
When computing net family property, do not fail to exclude the value of certain items like third party gifts, inheritances, personal injury awards, and proceeds from life insurances. When you get gifts from any of the sources above, endeavor to keep them separate from all other properties. Otherwise, you risk losing your exclusion.
You must prove that you are entitled to exclusion; hence, you should keep detailed records of all financial dealings relating to excluded property. Failure to justify exclusion means that you will forfeit excluded property to the family net property.
In case of litigation, think of the joint bank accounts
In a contentious divorce, relationships are sometimes conflicting. Certain precautions are necessary to protect their heritage. Start by modifying the terms of the joint account(s) so that they can no longer operate without the agreement of the two spouses, and no longer one or the other. Revoke any proxy given to your spouse in your personal account. Change the secret code allowing access to your account to avoid any untimely consultation by the other spouse. However, a joint account may be regularly fed by the two spouses. This account will only be used for “heavy” common debits, such as mortgage loans, large consumer loans, income tax.
Do not fail to deduct all deductible
When computing your net family assets, you are allowed to deduct your net worth on your marriage day. After some years, you may forget your marriage day personal assets, much less be able to prove it. To make the most of a deduction, keep a record of your asset’s value on the day of your marriage. Failure to prove deductions means that you will forfeit it…
Beware the matrimonial home
The value of a matrimonial home is an exemption to the rules of sharing assets on separation or divorce. The home’s value is usually split equally between the spouses. This is evidently a significant exemption because, for most couples, their marital home is one of their most significant properties. Therefore, care must be taken about which funds you use to acquire your matrimonial home. Using excluded property will make you lose its exclusion. In the same way, when purchasing a matrimonial home, make sure that there are other assets at least equal in value to what your net worth was on your marriage day. If not, you will fail to secure a deduction for this.
You can also have more than up to three marital homes; a home in the city, a cottage and a winter residence.
Relocate from the matrimonial home
If you are living in a home you owned on the day you married, you would lose half of the home to your spouse on separation. The law allows you to deduct from your net family property the value of assets you owned on your date of marriage; however, this does not include the value of a matrimonial home.
Purchase life insurance
Life insurance earnings are left out from the calculation of your net family property. You can use this fact to convert property that must be included in your net family property to create exclusion. By procuring life insurance on other family members l or business partners, you make a longstanding investment in assets that you need not share with your partner if you separate or divorce.
Improve the value of excluded property
Let us assume you have kept your excluded assets separate from your other property. If you can enhance the excluded property, by fixing up an inherited building, you are enhancing the value of your excluded assets.
That’s all for today! We hope this information has helped you!
Protecting your inheritances and gifts on separation can be pretty simple if you have the right lawyer standing by your side. Get in touch with us today and have your heritage protected. Call us now at 905-366-0202 to schedule a free consultation today or you can write to us here.