Distribution of Property in Ontario: The Details
Distribution of property in Ontario is not as simple as people believe it to be. Sometimes, people have the misconception that each asset or debt shared between married spouses is looked at separately and divided equally. The law in Ontario, however, takes a more global approach to property division in that it provides that married spouses are entitled to share equally in one another’s increase in net worth from the date of marriage to the date of separation.
At this point in time, the legislation does not apply to unmarried couples.
For married couples, it is necessary to determine what assets and liabilities each person had on the date of marriage and at the date of separation. The net amount, once determined, is called your net family property. The spouse with the greater net family property is required to give the other spouse a sum of money (or assets equal to the sum of money owing) that will make their net family properties the same. This payment is called an equalization payment.
Each person’s assets and debts registered in their names remains his or her asset or debt unless it is negotiated otherwise.
The Family Law Act provides that when calculating your net family property you may deduct the value of assets owned by you at the date of marriage. For example, if at the date of marriage you had an investment worth $10,000.00 and at the date of separation it was worth $20,000.00 you would only share, within the equalization calculation, the $10,000.00 that grew during the marriage. The one exception to this rule relates to the matrimonial home. If on the date of marriage, you own your home and reside in that home until the date of separation, you are not allowed to deduct the value of the home at the date of marriage. If however, you owned a home on the date of marriage that became or was the matrimonial home at that time but was sold prior to the date of separation, you will get the deduction.
The Family Law Act provides that any assets that you inherit or receive as a gift from a third party during the marriage are excluded from the calculation of your net family property, provided they have been kept separate and exist on the date of separation.
For example, if during the marriage you receive a gift of a $10,000.00 GIC and on the date of separation it is worth $20,000.00, the entire $20,000.00 is excluded from the calculation of your net family property. As above, there are special provisions relating to the matrimonial home. If you invested that $10,000.00 GIC in the matrimonial home, or other jointly held asset/debt, you would no longer be able to claim the exclusion.
The matrimonial home is treated in a special manner by the law. The right of possession of the matrimonial home is distinguished in law from the right of ownership. The Family Law Act provides that married spouses are each entitled to possession of the matrimonial home or to live there, until they agree otherwise in a Separation Agreement or the court grants an order for exclusive possession. More than one home can be deemed to be the matrimonial home, and this often includes cottages or vacation properties.
As noted above, at this time, such property sharing provisions only apply to spouses who were legally married as of their date of separation. Couples who are in common law relationships are not entitled to an equalization payment, but may be entitled to a payment from their common law spouse to pay the other back for a direct or indirect contribution to property that they own. These claims are referred to as trust claims.
A claim for the equalization of net family properties must be formally commenced (via court action) within two years from the date of your divorce or within six years from the date of separation (which ever occurs first). If you fail to commence a court action, your claim may be statute barred.
With respect to trust claims as between common law partners, there are also limitation periods that apply. You should consult a lawyer with respect to same and commence any claim as soon as possible to avoid an expiration of the limitation period.