Ontario law has different rules for dividing the value of property when people separate, depending on whether they are legally married or living in a common-law relationship.  Please keep this in mind.   The information here does not apply to spouses who have never legally married, even those who have cohabited for decades.  That’s a different story for another time.

When people are legally married and then separate, any increase in the value of their net worth during the marriage (with some important exceptions) is shared equally.  Here’s how that works, practically:

1. We must determine the date of separation. This is the date on which you knew that the relationship was over and there was no prospect of reconciliation.  Often this date is agreed, but not always.  Spouses can (and often do) remain living in the same home after they separate.  They may each have a different recollection about the date they separated.  When spouses do not agree, we look at a number of different factors that the courts have set out to determine the most appropriate date of separation, also called the “valuation date” because…

2. Financial disclosure. Each of the spouses disclose the value of all of their assets and debts at the date of marriage and at the date of separation

       Note: this can be easier said than done because:

  • Banks and other institutions often don’t keep records of accounts going back more than seven years, so date of marriage statements are not readily available
  • Assets like unvested stock options, Restricted Share Units (RSUs), sole proprietorship businesses, controlling interests in corporations, real estate, defined-benefit pensions, art, jewelry, etc. do not have values that are readily available with statements.  There is often a cost and some ambiguity when it comes to valuing these items.

3. We do some math.

a. We add up the value of all of the assets less liabilities each spouse owned at date of separation.

b. We deduct the value of assets owned at date of marriage, with the exception of any matrimonial home (yes, you read that correctly – if you owned a home before you were married you would essentially share all of the equity in the home with no credit for what you owned on the date of marriage, but if instead of a home, you owned an RRSP or some other investment, then you would be credited for the date of marriage value!), and add the value of any debts such as student loans owing at date of marriage.

c. We exclude the value of any gifts, inheritances and certain other very specific excluded property that you owned at date of separation

     Note: this is not the same as a deduction. The value of these assets is only excluded to the extend that you can trace them to an asset you still owned at date of separation…if you inherited $100,000.00 and spent it on traveling during the marriage there is nothing remaining to exclude at date of separation.

d. The math: the spouse who has a higher “net family property” (the value of the assets, less debts, less deductions and exclusions at date of separation) owes half the difference to the person with the lower net family property. This is called an “equalization payment.” Note that spouses are not dividing up their actual assets – each keeps their own and it’s the difference in total value at date of separation that is equalized by way of this one payment.

4. We discuss. In most cases, especially those that are not in court, there is room for discussion and negotiation around this equalization payment.  Maybe one spouse wants to keep the house, or a pension, etc.  If both spouses are amenable to this discussion,  we can talk about options that might satisfy the equalization payment in ways other than one spouse writing a cheque to the other.

5. If spouses can’t agree (whether through negotiation, in mediation, in a Collaborative Family Law process or while in a court process) then we are back to the legal model where each spouse keeps the assets in their own names, joint assets are sold and the equity divided equally, and the spouse with the higher net family property makes an equalization payment to the spouse with the lower net family property.