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Breakdown of the Marriage & Division of Property in Family Law
The courts in Ontario treat marriages as a form of partnership. As such, following separation and on the request of one of the parties, the court will assess the overall increases in the value of property accrued by the parties during a marriage and provide a balancing payment to one of the parties. In general terms, on separation, each spouse calculates his or her ‘net family property’ by deducting the value of his or her net asset position (being assets minus debts) as at the date of marriage from the value of the spouse’s net asset position as at the date of separation. The spouse with the greater net asset position will be required to pay one half of the difference to the spouse that has the lower net asset position. The payment that is made from one spouse to the other spouse is referred to as an ‘equalization payment.’
There are notable exceptions to these rules, which are known as excluded property. Excluded property is property that does not have to be included in a spouse’s net family property and the value of which is therefore not included in a determination of the equalization payment. For example, excluded property includes gifts or inheritances that are received during the marriage from a third party, so long as that money was not used towards the matrimonial home and was not inextricably co-mingled with the other spouse’s assets.
In addition, a court has the power to award a spouse an amount that is more or less than half the difference between the parties’ net family properties dependent on whether an equalization would be considered “unconscionable” under s. 5(6) of the Divorce Act.