Splitting assets when your marriage ends is one of the most stressful and difficult parts of divorce. If you’re facing separation in Ontario, you’re probably wondering what happens to everything you’ve built together—not just your house, but your retirement savings, pensions, and other financial assets. Here’s a guide to how things work in Ontario.
Equalization is The Basic Principle for Splitting Assets When Your Marriage Ends
Ontario uses “equalization of net family property” to divide assets when married couples separate. The idea is pretty straightforward: whatever you both accumulated during your marriage should be shared fairly. This usually means the spouse who ended up with more pays the other spouse to balance things out. This is called an equalization payment.
Each of you calculates your “net family property” by figuring out what all your assets (property, vehicles/boats, savings and investments, businesses, etc.) are worth on the day you separated. Then you subtract your debts and the value of anything you brought into the marriage. The person with the higher amount pays the person with the lower amount half the difference. This way, you both walk away having gained equally from your time together.
What Is Included and What Isn’t When Dividing Property
Most things you acquired during your marriage get included in this calculation – your car, furniture, business interests, bank accounts. But there are some important exceptions, called excluded property.
If you inherited money or assets from a family member during your marriage or received a gift from someone other than your spouse, and the asset or the funds still exist on the date that you separate, that’s usually excluded. The same is true for insurance money you received because someone died, or compensation from a personal injury like a car accident. The key here is that these funds aren’t commingled with joint assets so that matters don’t get complicated.
There’s one major exception to the exclusion rule, your matrimonial home. Even if you owned it before you got married, inherited it, or received it as a gift, the full value of where you lived together at your date of separation gets divided equally. This catches a lot of people by surprise. What can be even more surprising is that you can have more than one matrimonial home, like a family cottage.
Your Retirement Savings Are Included When Splitting Assets When Your Marriage Ends
One area that often gets overlooked is retirement savings. These are a significant part of your financial picture and are included in equalization.
If you have a workplace pension, the portion you built up during your marriage is considered property to be equalized. For defined benefit plans, you’ll need to get a formal valuation from the plan administrator to figure out what it’s worth under family law. This value then gets factored into your net family property calculation. You can either pay out the value as a lump sum or offset it against other assets you’re keeping.
Your RRSPs also get included in the calculation. The good news is that if RRSP funds need to be transferred as part of an equalization payment, this can happen tax-free between spouses. Similarly, any contributions you made to Tax-Free Savings Accounts during your marriage are part of your net family property and can be offset against other assets.
The Canada Pension Plan works a bit differently. Any CPP credits you earned during your marriage get split equally between you and your former spouse, but this happens through a separate federal process managed by Service Canada, not through the provincial family law system.
Dealing with Debts During Divorce
Debts factor into this calculation too, but they reduce the value of your assets rather than being divided separately. Generally, you’re each responsible for your own individual debts, though joint debts often get split between you. In rare cases where one spouse deliberately incurred debt to drain family property, a court might order an unequal division.
Time Limits You Need to Know If You’re Splitting Assets When Your Marriage Ends
If you can’t agree on how much the equalization payment should be and need a court to decide, you have a deadline. You must go to court within six years from the day you separated or within two years from the day your divorce becomes final, whichever comes first. Missing this deadline could mean losing your right to equalization.
You Don’t Have to Do It by the Book When Dividing Property
Here’s something many people don’t realize. If you both agree, you can divide your property any way you want through a separation agreement, you’re not locked into the standard calculation. Maybe one of you wants to keep the cottage and give up something else in exchange. Maybe you want to arrange things differently for tax reasons or to avoid selling certain assets.
However, it is important that both parties exchange full financial disclosure first to ensure that everyone knows what they are actually entitled to before making a decision that deviates from the standard calculation. Without full financial disclosure, a party can apply to the court to set aside a separation agreement due to lack of information about significant assets and debts – essentially, you can only make your own deal if you know what your rights and obligations were in the first place
The key is getting it in writing and having each of you review it with your own family law lawyer before signing. Once you sign a separation agreement, it’s very difficult to change later, so you want to make sure you understand what you’re agreeing to.
How to Split Assets When You Can’t Agree
If negotiating between yourselves isn’t working, you have options before going to court. A mediator—a neutral family law professional—can help you and your spouse work through the issues and reach an agreement between yourselves. This tends to be faster and less expensive than court, and you maintain more control over the outcome.
Arbitration is another route where an arbitrator makes a binding decision for you based on the law or on terms you both agree to. It’s more formal than mediation but still usually faster and more private than court.
If all else fails, one of you will need to start a court application and have a judge decide how to divide your assets. Courts will abide by the standard equalization rules unless splitting things fifty-fifty would be extremely unfair which happens in very rare circumstances.
Have Questions About Splitting Assets When Your Marriage Ends? We’re Here to Support You.
Splitting assets when your marriage ends has a huge effect on your financial future. While the basic principles might seem straightforward, applying them to your specific situation can get complicated quickly. Formal valuations, tax implications, and making sure nothing gets overlooked are all good reasons to work with experienced lawyers who are skilled in family law.
Whether you’re just starting to think about separation or you’re already in the middle of negotiations, the lawyers at Scharff Nyland Chambers LLP can help you understand what you’re entitled to and what to expect. We offer support through our offices in Barrie, Toronto, Wasaga Beach and Collingwood. Call us at 1-866-721-5851, email reception@sncfamilylaw.com, or book a consultation through our website.
***The information provided in this blog is for general informational purposes only and should not be construed as legal advice. If you have legal questions, we strongly advise you to contact us.
