Division of Property
Provincial legislation determines the rights of the residents of that province with respect to property. In Ontario, the Family Law Act describes who qualifies for “equalization of property.”
To qualify for equalization calculations, the parties must be married. Equalization of property is not a concept that gives property rights to common-law partner who are not married, even if they have been together for a very long time, and not even if they have children together.
The concept of “equalization” is not one in which the property is divided 50-50 in all cases.
The concept is that parties will be entitled to take away from the property that both own, the following:
“property owned on date of marriage, reduced by their debts at that time” (so long as that party can demonstrate the value of their net property on the date they were married);
the other categories being “gifts or inheritances” received by the parties during the marriage, and
“personal injury damages” (payments received for pain and suffering and intended to be personal to that individual which would exclude a payment which was for a loss of income), but with both of these (gifts or inheritances and personal injury payments) these must be in existence on the date of separation (“traceable” which means that you can follow them from the time that they were received up to the date of separation with accurate financial statements from a bank, investment dealer, brokerage, etc.).
These concepts are implemented by a detailed financial review in the court system requiring completion of Financial Statements, either under oath or affirmed as being true.
The information from both the wife’s and the husband’s Financial Statements is integrated into a document entitled a Net Family Property Statement, which will calculate a figure that is to be paid from one to the other.
This is called an “equalization payment” (which is the amount that is necessary for one to pay to the other so that the proper balance of assets and debts is achieved). These documents require skills and experience to accurately be completed. A lawyer and/or a family mediator can assist in this process.
The Special Treatment of the Matrimonial Home
A “matrimonial home” is defined in the provincial legislation, Family Law Act of Ontario, as the residence(s) in which the parties were residing at the time that their relationship ended (“separation date”). A special rule was implemented in the Act and says that the value of the matrimonial home is always divided.
This phrase means that there cannot be a deduction for any of the reasons set out when calculating an equalization payment, as described in the paragraph above “Calculating Division of Property.”
It does not matter whose name the property is in, nor does it matter that traceable excluded property for “gifts or inheritances” or “personal injury payments” were paid into the matrimonial home, the value of a matrimonial is fully included in the Net Family Property Statement, as an asset without deduction to the credit of either party.
If the property is owned by both parties, there may be additional rights available, and other legislation to deal with the interest in this property, pursuant to the provincial legislation entitled The Partition Act.
Pensions and Investments
When calculating “equalization payments,” pensions of the parties and investments are included, but may be reduced by the value of those items.
With respect to investments or other assets, if they were owned on the date of marriage, the value as of the date of marriage may be excluded.
With respect to pensions, the rules in Ontario are not that the exclusion happened from the date of marriage, but from the date of “cohabitation.”
The values can be determined by requiring the pension holder, if they are a provincial pension operator (as opposed to a federal pension) such that the pension holder will have their administrator calculate the pension values, and explain how much can be transferred from one person’s plan to a plan or holding pattern for the funds for the benefit of the other party.
The value of the pension may be distributed by reduction of the holder’s plan by way of payment out of that plan to the benefit of the other party and their respective plan or holding. Another method that is used is to include the value of the pension into the calculation of the Net Family Property Statement.
However, there may also be in the Net Family Property Statement, an estimated deduction because the owner of this pension will have to pay tax when they receive their payments out of the plan. This may require expert opinions, or an agreed-upon deduction. This process has complications and lawyers, and/or mediators, can assist in the process.
Common-Law Relationships and Division of Property
People who are not married are in a very different situation when it comes to the division of property. The concepts of “equalization of property” that apply to married couples in the Family Law Act of Ontario are not available to them.
The starting point for division of property for common-law couples is the same as if they were “roommates.” If a “roommate situation” comes to an end, each takes away from the shared residence what they brought in, or what they purchased. The things that they bought in their own names, or investments or vehicles, belong only to them.
Any division of property beyond ownership requires arguments that there are good reasons why additional claims can be made. These fall into categories of:
“resulting trust” (example: a financial contribution for the purchase of the item);
“constructive trust” (example: contributed time or effort looking after the item or increasing its value); or
“joint venture” (contributed in a full financial way, such that there had been during the relationship a complete sharing of all financial issues with the understanding that each would take away from the relationship one-half of all accumulated value).
These are complicated processes which require a careful and detailed review of historical events and facts.
If the parties, prior to separation, had chosen to do a “domestic contract,” they may have defined and described how things are to be divided if and when the relationship ended or one of the parties passes away. If a domestic contract has been signed, it needs to be reviewed, and determined as to its potential enforceability (usually these are enforceable, but not always).
All of the concerns of unmarried persons when it comes to property require careful analysis. Lawyers and/or family mediators can assist in this process.