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Separation. Divorce. Child Custody and Access. Child Support. Spousal Support. Division of Property and Assets.

Division of Property and Assets Articles

The Equalization of Net Family Property: The Guiding Principle of Ontario Family Law


If you and your spouse are married, when you separate or divorce you are entitled to what is called the equalization of net family property. That equalization will be done for any couple who comes to the court for property division (rather than settling their affairs privately), and spouses are entitled to equalization regardless of the nature of the specific marriage or the couple’s conduct. Either spouse can apply for equalization of family property under Ontario’s Family Law Act (FLA), at any time following separation.
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Information Needed to Calculate Division of Property


The Family Law Act (FLA) provides for the equal division of the value of all assets acquired during the marriage (referred to as “net family property”). Under section 7(1) of the FLA, either spouse can, upon divorce or separation, apply for a determination of the spouses’ entitlement under the equalization of net family property. For more information on the rationale behind equalization, see the article [The Equalization of Net Family Property: The Guiding Principle in Family Law].
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The Matrimonial Home


The matrimonial home is afforded special treatment under the Family Law Act (FLA). Part 2 of the FLA deals entirely with the matrimonial home: what it is, how it is treated in the equalization process, and who has a right to possess it. For many couples, the matrimonial home represents the largest and most significant asset, and it is also a place of great emotional and personal significance. It is important that couples properly understand how this home is treated under the law.
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Common-law Relationships and Division of Property


Unlike married couples, common-law couples (couples who live together but are not married) are not entitled to the equalization of their family property. The provisions in Ontario’s Family Law Act (FLA) that govern the division of property apply only to married couples, not to common-law couples. Each partner in a common-law relationship is therefore entitled only to whatever he or she brought into the relationship or acquired during it.
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Equalization and How it is Calculated


Ontario’s property equalization scheme under the Family Law Act (FLA) is called a “deferred community-of property” regime. This means that when two people enter into a marriage, each spouse becomes automatically entitled to an equal share of the profits of that marriage. (See the article The Equalization of Net Family Property – The Guiding Principle of Canadian Family Law for more information on this point.)

That right to equalization is triggered when the marriage dissolves or one spouse dies. Each partner then becomes entitled to one half of the value of property accumulated during the marriage (not one half of the property itself). The court orders one spouse to pay the other an “equalization payment,” in order to equalize the value of each spouse’s net family property.

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Pensions


Pensions are property under the Family Law Act, and are therefore included in a spouse’s net family property for the purposes of equalization.

The Family Law Act and the Pension Benefits Act were revised in 2012 to simplify the process of calculating and dividing the value of a person’s pension assets. Formerly, spouses would have to hire an actuary to determine the value of their pension assets. Now, that value is to be determined by the pension administrator.
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Self-employed? How Businesses are Valuated


If one or both spouses own a business, or owned one at the date of marriage, that business will need to be valuated. If a business was owned at the date of marriage, its date of marriage value can be deducted from that spouse’s net family property. In order to do so, that spouse will have to indicate the value of the business at the date of marriage. If the business was still in existence at the date of separation or divorce, it will have to be valuated again. This is because if the business increased in value during the marriage, that profit will be divided between the couple like any other asset. If the business was acquired during the marriage, its value will be similarly shared between the spouses, and this will require a valuation. (For more information on how property is divided, see the article Equalization and How it is Calculated.)
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Inheritances and Gifts


As you may be aware, the value of gifts or inheritances that you or your partner received during your marriage are excluded from the division of property upon separation or divorce. You may not know, however, that you have to treat those gifts or inherited items in a specific manner in order to take advantage of that exclusion.
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