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Division of Property: An Overview

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If you are thinking about getting a divorce and are worried about what will happen to your family home, you are not alone. This is a common concern for most people. Understanding how division of property works and what the court takes into consideration may help you feel a little more prepared for what lies ahead.

What is property?

Property includes everything you own. This may include real estate, like homes and cottages; vehicles, like cars, boats and RVs; personal items, like clothing, jewellery and books; and household items, like furniture, appliances and electronics. Bank accounts, RRSPs, investments, insurance policies, pensions, and other financial assets and owned businesses also fall under the umbrella of property that may be divided upon separation.

How is property divided?

The Family Law Act is the Ontario law that deals with the division of property for legally married couples. When a married couple separates, each spouse usually keeps their own property, but they share in any increase in the value of their property from the date of marriage to the date of separation. Usually this means that one spouse must pay the other spouse an “equalization payment”.

The time limit to make a claim for an equalization payment is 6 years after the separation or 2 years after a divorce, whichever is sooner. Sometimes a court may give an extension of time to make a claim.

What is Equalization?

An equalization payment is what occurs to “equalize” the increase in each party’s net worth from the date of marriage to the date of separation. As a simple example, if John was worth $100 on the date of marriage and $200 on the date of separation, and Jane was worth $100 on the date of marriage and $600 on the date of separation, Jane would pay John an equalization payment of $200. This is because Jane’s net worth has increased $500 throughout the marriage, and John’s net worth increase $100 throughout the marriage for a difference between them of $400. Therefore, a payment of $200 from Jane to John equalizes the respective increases in their net worth from the date of marriage to the date of separation.

There are some exceptions and nuances to the division of property and equalization. For example, gifts and inheritances received from a third party during the marriage are excluded from the calculation of equalization.

If you are in a common law relationship, you are not entitled to an equalization payment, but may be entitled to a payment from your spouse to pay you back for a direct or indirect contribution to property that he or she owns. These claims are referred to as trust claims.

To learn more about property claims, equalization and trust claims, speak with us at (416) 961-6111 x 31

About the Author

Cheryl Goldhart and the team of lawyers at Goldhart & Associates work exclusively in the area of family law. They have the experience and dedication to assist clients achieve their objectives.

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