PROPERTY DIVISION FOR MARRIED COUPLES

Married couples in Ontario are subject to the Family Law Act, Part I of which deals with the division of property. The philosophy of the Family Law Act is that, subject to certain exceptions, any financial growth during the marriage is to be shared equally by both spouses. Accordingly, upon separation or death, a calculation is done separately for each spouse to determine the growth in the value of that spouse’s assets during the marriage (called “net family property”) and a payment is then made by one party to the other (called “an equalization payment”). Under the Family Law Act, there is no actual sharing of property and each party is entitled to retain whatever property they own, subject to the requirement that at the end of the day one spouse may have to make a cash payment to the other spouse.

In order to do the calculation, each party prepares a statement of his or her assets and debts at the date of marriage and at the date of separation or death. The value of the net assets at the date of marriage is deducted from the value of the net assets at the date of separation or death.

The exceptions mentioned above relate primarily to matrimonial homes and inheritances and gifts. A matrimonial home is a home in which you are both residing at the date of separation or death. It is usually impossible to tell at the date of marriage whether a particular home will be a matrimonial home or not, since you cannot predict separation or death and do not know where you will be residing at that time.

If you are living in the same home at the date of marriage as at the date of separation or death, the value of the home at the date of marriage cannot be deducted from the value of the net assets at the date of separation or death. In effect, the entire net value of the home is shared equally between the spouses.

Secondly, any gift or inheritance received by a spouse after the date of marriage is not to be included in that spouse’s net family property. Nor will any growth from the gift or inheritance be included. However, any income derived from the gift or inheritance will be included in the calculation unless the donor of the gift expressly states otherwise.

If the gift or inheritance is used to purchase a matrimonial home (even a cottage or a ski chalet can be a matrimonial home if used by the spouses at the time of separation or death) or to increase the equity in such a home, it loses its protection.

The above information is an explanation of how the Family Law Act applies in the absence of an agreement.

PROPERTY DIVISION FOR UNMARRIED COUPLES

The Family Law Act does not apply to cohabiting couples who are unmarried. Cohabiting couples generally divide their property on separation in accordance with ownership. However, where one party has contributed financially or otherwise to property owned by the other, the contributing party may be able to seek compensation or an interest based upon equitable principles. Whether or not a cohabiting spouse has a claim to property of the other spouse, depends on the particular circumstances. This is called a claim based upon unjust enrichment.