PROPERTY DIVISION ON MARRIAGE BREAKDOWN
Many new family law clients have misconceptions about the
rules for property division on marital breakdown. We hope the
following summary assists our clients and potential clients in
understanding their rights and obligations in that regard.
Common Law Spouses
There is a misconception that after three years, there arise
property rights among unmarried spouses. Simply put, common law
spouses do have potential SUPPORT claims against each other, but
NOT PROPERTY claims. There is some judge-made law applying to
long-standing relationships, but in the usual case, this law of
"constructive trust" does not apply.
Division of Net Family Property
Property claims between married spouses in Ontario are dealt
with under Ontario's Family Law Act. Since 1986 the regime for
property division on separation has been called a division of net
family property (NFP). This is a "debtor-creditor" type
of scheme. You value and add up the NFP of each spouse on the
date of separation (the valuation date), and then the spouse with
the greater NFP must pay to the other spouse one half of the
difference between their NFP totals--resulting effectively in an
equalization.
Typical Scenario: Jim and Margaret
Jim and Margaret married in 1980 and separated on January 1,
2001. At the time of marriage Jim had no assets to speak of, but
Margaret had $50,000 in Canada Savings Bonds, which she retains.
They are now worth $200,000. During the marriage, Jim contributed
to his pension at work, they bought and paid for a jointly owned
house, now worth $200,000. Jim has a 1998 Buick worth $10,000 on
the date of separation, and the family van is in Margaret's name.
It was valued at $20,000 on January 1, 2001, but had an
outstanding vendor's lien from the car dealer of $10,000.
A Pension is Property
Pension owners do not like to think of it this way, but their
pension has a value. The value of the pension earned during the
marriage must be included in their NFP. Jim and his lawyer must
obtain detailed information about his pension, have it valued (as
of the date of separation) by an actuary, and include that value
in Jim's NFP. That figure in our scenario is, say, $40,000.
Jim's Net Family Property
Adding up Jim's NFP:
Deductions from Net Family Property
Before moving on to Margaret's property, we stop to consider
the allowed deductions from NFP. These include the value of:
gifts or inheritances received
during marriage
property owned on the date of
marriage
debts/liabilities on the valuation date
Margaret's Net Family Property
Adding up Margaret's NFP:
1/2 interest in house
$100,000.00
Canada Savings Bonds
$200,000.00
family van $20,000.00
LESS: CSB's at marriage
($50,000.00)
LESS: debt against van
($10,000.00)
Total $260,000.00
Equalization Payment
Margaret must pay Jim ½ of the difference of
$110,000.00, that is, $55,000, so that they both end up with
$205,000. Note they still jointly own the house, which they can
sell or deal with at any time.
Consult a Lawyer
There are many issues relating to a division of property which
we cannot, of course, deal with in this context. Greg McConnell
and Stephen Fleury at our firm are all experienced family law
practitioners. Please feel free to call any one of us for a
consultation in regard to these issues.
Download the
printable version of this document.
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