Sharing Property on Breakdown of Marriage
When a married couple separate and decide that they will not get back together, they will need to make arrangements to divide their property. To do so, they must calculate the value of all the property they possess and the amount of debt that they have incurred.
The value of all the assets of the spouses minus the debts and liabilities is termed the ‘net family property.’
Generally speaking, unless there is a special contractual agreement, such as a Marriage Contract, the value of all the property that was accumulated during the marriage is shared equally between the spouses.
The term “property” includes, among other things, the value of all bank accounts (chequing and savings), RRSPs’, investments, pension plans, business interests, shares and insurance. It also includes the value of cars, boats, jewellry, household items, and any other possession of value such as antiques or guns.
Debts are deducted from the total and these include mortgages, credit card debts and any other amounts owed. The date on which the property and debts are valued is the date the couple separated.
It should be realized that a spouse does not have to share with the other spouse the value of any assets he or she brought into marriage. Therefore, one of the essential dates in making the calculation of net family property is the date of marriage. Furthermore, a spouse does not have to share with the other spouse any traceable inheritance or gift from a third party that he or she acquired during marriage. Making a list of these items and their value is therefore important in obtaining an accurate picture of what should be shared between the spouses.
When the assets are totalled and the debts and deductible property are subtracted, what is left is the net family property of each party. One half of the difference in value between the two amounts is the amount that will be owed to the spouse who has the lower amount. This adjustment is called the equalization payment. It does exactly that: it equalizes the amount of money that each spouse will take out of the marriage from the assets that were built up by both parties during the marriage.
It is important to remember that it does not matter who owns the assets or bank accounts. Marriage is considered to be a partnership and the law assumes that both parties contributed in their own way to the accumulation of money and belongings and that therefore both parties are entitled to share in that accumulation. Therefore, if, for example, one spouse has stayed home to look after the family, and has no valuable assets in his or her name, and the other spouse has contributed to RRSPs, has a pension plan, insurances and other goods in his or her name, the spouse who has stayed at home is still entitled to share one-half of the value of all assets accumulated during the marriage.