How Does Division Of Property Work In A Divorce?
Divorce is not a simple process. It involves emotional upheaval and complex legal proceedings, especially when it comes to the division of property. In Ontario, the process follows specific rules outlined by the Family Law Act. Before you go ahead and let your partner know that you want a divorce, it’s important to educate yourself about how the division of property works.
The Basics: Equalization of Net Family Property
In Ontario, the process of dividing assets during a divorce is formally known as the equalization of Net Family Property (NFP). NFP is essentially the value of all assets a person has accumulated during the marriage, minus any liabilities and the value of assets brought into the marriage (with some exceptions). The principle is that each spouse is entitled to share equally in the wealth accumulated during the marriage.
Property Included in the Net Family Property
Property types that are included in the NFP include matrimonial home, cars, bank accounts, investments, pensions, business interests, and any other property purchased during the marriage.
However, some properties are excluded from the NFP, like gifts or inheritances received during the marriage, income from a trust, or damages awarded for personal injuries. But note, if these assets are used to acquire or improve the matrimonial home, they then become part of the NFP.
The Matrimonial Home
The matrimonial home holds a unique place in Ontario family law. Whether it was acquired before or during the marriage, both spouses have an equal right to stay in the home until it is sold or until a court orders otherwise.
In terms of equalization, the entire value of the matrimonial home is included in the NFP. This is true even if one spouse owned the home before the marriage. This is a distinctive feature of Ontario law and different from the rules regarding other types of property.
Calculation of Equalization Payment
The equalization process aims to balance the NFP between spouses. To determine the equalization payment, each spouse’s NFP is calculated, and the spouse with the higher NFP pays half the difference to the spouse with the lower NFP.
For example, if Spouse A has an NFP of $100,000 and Spouse B has an NFP of $50,000, Spouse A will owe Spouse B $25,000. This payment equalizes their NFPs at $75,000 each.
Pensions earned during the marriage are also part of the NFP. The calculation of the pension’s value can be complicated and may require a professional pension valuator. Ontario law has specific provisions for dividing a pension between divorced spouses, and it’s advisable to seek legal counsel to navigate these.
Exceptions and Deviation from Equal Division
While the equalization process generally aims for a 50/50 split, there are circumstances where a court may order an unequal division of property, such as in cases of a marriage of very short duration or if one spouse has recklessly depleted their assets.
Also, a valid domestic contract (also known as a prenuptial agreement or marriage contract) can change how property is divided upon divorce.
Getting Legal Help
The division of property in a divorce is a complex process with many nuances. Therefore, if you’re going through a divorce in Ontario, it’s highly recommended to seek legal advice. A lawyer can help protect your rights and interests, provide personalized advice based on your situation, and guide you through the legal process.Understanding how the division of property works helps you to anticipate possible outcomes and make informed decisions. If you’re seeking legal advice about divorce and division of property, our family lawyers at Noori Law are here to guide you. Get in touch with us today.