Whether you are married, separated, divorced, or under common law, the law has rules about how to decide the value of family property and how to divide the property. If you are married, the law sees marriage as an economic partnership. If you are divorced, the family assets and debts that have built up during your marriage (net family property) must be divided equally. However, if you and your partner were not legally married and are classified as common law, you will not automatically have the same rights.
Property can be defined as anything you own, such as your homes, cars, personal and household items, pensions, bank accounts and any other investments, including debts.
When a marriage ends, the equal contribution of each person to the marriage is recognized. The law requires that the value of any kind of property that was established by a spouse during the marriage and still exists at separation must be divided equally between the spouses. Also, any increase in the value of property owned by a spouse at the date of marriage must be shared. The payment that may be owed to one of the spouses in order to effect this sharing is called an equalization payment, or an equalization of net family property.
Types of Property
The family home, or matrimonial home, is the home where your family mostly lived before you separated. If you own this home, each of you has the right to share in the value of the equity on the home. The only time the value of the home would not be shared is if you and your spouse had signed an agreement (marriage contract) that says the home will be kept out of the equalization process.
Starting January 1, 2012, pension plan members who have to pay their former spouse a settlement based on the value of their pension plan will be able to make some or all of the payment from the pension plan itself. The pension plan administrator will also now be responsible for valuing the pension plan so that spouses do not have to hire an actuary to do this for them.
Personal and Household Items:
Reasonable ‘personal effects’ (belongings) are normally not considered to be matrimonial assets. What a ‘reasonable personal effect’ is may be hard to figure out in some cases, especially if the item in question is valuable (like jewellery). Legal advice is often helpful to assist you in deciding what items are ‘personal.’
House hold items are goods and products used within households. They are the tangible and movable personal property placed in the living rooms, dining rooms, kitchens, family rooms, guest rooms, bedrooms, bathrooms, recreation rooms, hallways, attics, and basements and other rooms of a house.
When it comes to household items and repairs, the parties by agreement, can decide who is to arrange, carry out or pay for things like house repairs, insurance, mortgage and taxes on the matrimonial home.
If the parties cannot agree, then either one of them can file a motion for ‘interim’ relief requesting that a judge decide these issues for the short term until a final hearing or trial can be scheduled. Get legal advice about your rights and obligations. A lawyer can help you sort out different ways to do this that may be able to benefit you, or the family as a whole.
Matrimonial or family debt is debt that was acquired by either spouse or both spouses together during the marriage that was used for ordinary family matters. These may include such things as household expenses, the mortgage on the family home, or debt used to finance a family car. If some debts were acquired after you separated from your spouse they may be considered matrimonial debts if they were used to pay for necessary living expenses or to maintain the house or car or other assets.
As a general rule, both spouses are equally responsible for a debt that is in both of their names. You may also share responsibility for debts that are only in your spouse’s name if the money was used to buy something that benefited you or your family. Examples are heating oil or a family vacation. Usually you are not responsible for your spouse’s non-matrimonial debts unless you co-signed or guaranteed them. For example, you would not usually be responsible for debts your spouse acquired to run their business, or debts acquired by your spouse before the marriage.
What is the process for dividing property?
The process of dividing family property is called equalization. There are two steps in the equalization process.
Step 1: Calculate net family property:
- The first step in the process is that each of you calculates the value of your net family property.
- To do this, each of you must make a list of your assets at the time you separated and total the value of the assets. From this amount, you deduct the value of:
- debts owing at separation
- the value of property that you brought into the marriage
- gifts you were given
- property you inherited
- damages for personal injury
Step 2: Share the family property equally:
Once each of you has calculated your net family property, its value must be equalized. Each of you must tell the other your net family property. The spouse whose net family property is higher must pay the other spouse half of the difference between the two amounts. This is called an equalization payment.
In some cases, the court can order a different equalization payment if the equalization amount is unfair. For example, the court could order your spouse to pay more if he did not tell you about large debts he had when you were married, or if he got into major debt on purpose.
Property rights are very different for people who in to live common-law relationships. Each of you owns whatever property you brought into the relationship and whatever you bought while you were together. Complications arise when the property increases in value and it is owned by just one common-law spouse.
If you and your partner lived in a common-law relationship, you do not have equal rights to the value of your matrimonial home. The home that you lived in as a couple belongs to the person whose name is on the title.
You and your common-law partner could write a cohabitation agreement to set out how you would deal with property and debts if you separate. If you do not have a cohabitation agreement and you cannot agree about how to divide your property, either one of you can go to court. You can ask a judge to award you a share of what you bought as a couple, or a share of the amount that a property increased in value during the relationship.
In the case of Collins v. Collins, 2000 192 Nfld & PEIR 6; 6 RFL (5th) 101, the Plaintiff, Mrs. Collins, claims she is entitled to equal division of the property between her and her husband Mr. Collins.
The evidence is clear in this matter that Mrs. Collins has been the sole person responsible for all maintenance of the property for the past 15 years. She was responsible for all municipal taxation and the day to day upkeep of the property. This was done while Mrs. Collins also endeavoured to support the two children of the marriage.
Mr. Collins did not make substantial contributions to the children’s maintenance during the early years of separation. This is evidenced by the fact that Mrs. Collins had to resort to assistance from the Department of Social Services, as Mr. Collins was not in a position to provide financial support to his family on a continuous basis in the years prior to receiving a disability pension.
In circumstances such as the mentioned case, section 4(6) of the Family Law Act allows for an unequal division of assets after certain factors are considered.
Section 4(6) FLA states:
PART I FAMILY PROPERTY
Variation of share
- (6) The court may award a spouse an amount that is more or less than half the difference between the net family properties if the court is of the opinion that equalizing the net family properties would be unconscionable, having regard to,
(a) a spouse’s failure to disclose to the other spouse debts or other liabilities existing at the date of the marriage;
(b) the fact that debts or other liabilities claimed in reduction of a spouse’s net family property were incurred recklessly or in bad faith;
(c) the part of a spouse’s net family property that consists of gifts made by the other spouse;
(d) a spouse’s intentional or reckless depletion of his or her net family property;
(e) the fact that the amount a spouse would otherwise receive under subsection (1), (2) or (3) is disproportionately large in relation to a period of cohabitation that is less than five years;
(f) the fact that one spouse has incurred a disproportionately larger amount of debts or other liabilities than the other spouse for the support of the family;
(g) a written agreement between the spouses that is not a domestic contract; or
(h) any other circumstance relating to the acquisition, disposition, preservation, maintenance or improvement of property. R.S.O. 1990, c. F.3, s. 5 (6).
This was a case where an unequal division of the matrimonial home was substantially in favour of Mrs. Collins. Therefore the decision was made in her favour for an unequal division of the net family property.
If you need any help with family law matters, contact our experienced family lawyers in Toronto, Pickering, Markham, and Scarborough. You can call us at (905) 492-7662 or email us at [email protected] to schedule a consultation.