property division - married couples

Ontario’s Family Law Act sets out the framework for property division, called “equalization”. Marriage is viewed as an equal economic partnership, and as such, both partners should equally benefit from any value that has accrued during their marriage. Equalization is concerned with sharing the monetary value of property, as opposed to splitting the physical property in half. The fact that people have married does not affect ownership of their property.

Net Family Property

Not all property will be shared between spouses. The Act provides that “net family property” (NFP) is to be equalized. A spouse’s NFP is made up of all property they own at the date of separation, less the value of any debts, property they owned on the date of marriage, and the value of any “excluded” property like gifts, inheritances, and life insurance proceeds. 

Date of Marriage Deduction

This refers to all of the property that each spouse brought into the marriage. The value of this property will not be equalized, which ensures that only property acquired during the economic partnership of marriage is shareable between the spouses. The matrimonial home is a major exception to this rule.

Matrimonial Home

The matrimonial home is the home the couple lived in at the date of separation. One family can have several matrimonial homes, typically a cottage and/or vacation homes. The Act does not permit spouses to “deduct” the value of the matrimonial home as of the date of marriage. The entire equity of the matrimonial home will be shared as of the date of separation, even if one spouse held sole title at the date of marriage. This is the only asset that does not benefit from the date of marriage deduction under the Act. Notably, title of the home still does not change hands; it is still the value that must be shared.

Exclusions

Some property that was acquired during the marriage is not subject to equalization. Common examples are gifts received by third parties, inheritances, and proceeds from a life insurance policy. Excluded property also benefits from a concept called “tracing”: any property (other than a matrimonial home) into which an excluded asset can be traced will also be excluded from equalization.

Equalization Payment

Both spouses must provide full and transparent financial disclosure to properly calculate their respective NFPs. Once completed, the spouse with the higher NFP must pay the other spouse one half the difference. This results in both parties receiving half of the wealth acquired during the marriage.

Complications

Equalization is conceptually simple. Disagreements typically surround the value of certain assets, particularly with complex assets like a business, trust interests, or shares, along with the appropriate notional discounts to be applied to those assets.