How does property get divided in a divorce?
When married spouses separate, each spouse is required to report the value of their assets and debts as of the date of marriage and the date of separation. Each spouse is also required to determine the growth of their net worth from the date of marriage until the date of separation. This is calculated by taking the value of each spouse’s net worth (assets minus debts) as of the date of separation and subtracting the value of each spouse’s net worth (assets minus debts) as of the date of marriage. The value calculated by each party is their “net family property”.
After determining each spouse’s net family property, the parties compare their respective values and the spouse with the higher amount of net family property is required to pay the other party an equalization payment, or transfer property to the other party so that the value of both spouses’ net family property becomes equal.
This may seem simple, but it quickly becomes complex with issues such as properly valuing each piece of property, accounting for tax that may be owed, determining the ownership of certain property, and addressing whether any pieces of property should be excluded from the calculation.
What is considered family property?
It is easier to define what is not family property. The default starting position is that everything you own on the date of separation is considered family property. This includes:
- The home where the spouses live (the Matrimonial Home);
- Land and property;
- Pensions through work;
- RRSPs and investments;
- Bank Accounts;
- Vehicles; and
- Personal Property (Jewelry, Art, Collector’s items etc.)
From there, you deduct property that should be excluded, such as:
- Property that was acquired by gift or inheritance from a third person after the date of the marriage;
- Any income that is generated from property that was acquired by gift or inheritance from a third person after the date of marriage;
- Damages, a right to claim damages, or any part of a settlement that represents damages received from a civil litigation claim;
- Proceeds or a right to proceeds of a policy of life insurance that are payable on the death of the life insured;
- Property which items 1-4 can be traced into;
- Property that spouses have agreed will not be considered family property pursuant to a prenuptial agreement, marriage contract or cohabitation agreement; and
- Unadjusted pensionable earnings under the Canada Pension Plan (CPP).
The spouse who claims that any of the above pieces of property should not be included in their net family property has the responsibility to prove how the asset was obtained.
Does your spouse always get half of everything in a divorce?
Not always –the Court can unequally divide spouses’ property after a separation if it would be unfair for the spouses to divide everything equally. It is rare that the Courts will order an unequal division of property, but it does occur. When deciding whether to divide everything equally or make an unequal division, the Court will consider:
- If at the time the parties got married, one spouse failed to disclose to the other spouse debts they owed;
- If one spouse is including debts in their net family property that he or she incurred recklessly or in bad faith;
- If one spouse’s net family property is made up of gifts made by the other spouse;
- If a spouse has intentionally or recklessly spent his or her net family property;
- If the spouses have lived together for less than five years and an equal division of the spouses’ assets would give one spouse a disproportionately large payment;
- If one spouse has incurred a larger amount of debt than the other spouse in supporting the family; and
- If there is a written agreement between the spouses that is not a formal pre-nuptial agreement, cohabitation agreement or marriage contract.
Do common law partners have rights to property?
Addressing the division of property for common law couples is more complex than married couples. Common law spouses do not have the same rights to property as married spouses or an automatic right to share property upon separation. There is no net family property calculation or equalization payment owed in common law relationships. Instead, property will be divided based on ownership. If you are in a common law relationship, the property you bring into the relationship and any increase in its value is usually yours to keep.
Even though there is no automatic right to your spouse’s property, you may be entitled to claim an interest in your spouse’s property because of contributions you made directly to the property or to the relationship. A right to share in your common law spouse’s property can arise three different ways.
First, if you purchase a piece of property but register it in your common law spouse’s name, you may be able to reclaim part or all of the property on the basis that it would be unfair for your spouse to keep the property when they did not purchase it.
Second, if you contribute to the value of a specific piece of property through financial contributions or labor, you may be able to claim a monetary share in the value of the property or an interest in the property. For example, if your common law spouse owns a house, but you kept the house clean, repaired the property, paid 50% of the mortgage and other household expenses, and contributed funds for renovations, you may have a claim to an interest in your spouse’s house or for repayment of your contributions.
Third, if you have contributed money or labour in the relationship to the benefit of your common law spouse, but not directed it towards a specific piece of property, you may be able to make a claim for the value of your contribution.
Disclaimer: The information contained on this page is only intended for information purposes and is not intended to be construed as legal advice. Speak to one of our family law lawyers if you have any questions about division of property.