The general rule dictates that spouses in a marriage should equally divide their assets in Ontario. The principle behind this mandated division is that both spouses likely made vital and essentially equal contributions with their time and finances to the family unit and aided in the acquisition of wealth. Therefore, both spouses should retain equal value of assets on dissolution.
The spouse whose net family property (“NFP”) value is less, is entitled to one half the difference between the NFP. This is called an equalization payment. Follow the guide below to first determine the NFP of each spouse, and then to calculate the amount owed to the recipient spouse.
Step 1: Determine the valuation day, which is the date you separated or the divorce was granted, and list the value of assets owned by each spouse on this day for each spouse.
Determine if any of the assets constitutes an “excluded property” that does not need to be calculated as part of your NFP to be shared with your spouse. It is advantageous to have a lower NFP, so the more properties you can exclude, the more likely it is that you will be the recipient of an equalization payment. Excluded properties are:
Step 2: Determine the total value of debts and liabilities on valuation day.
Step 3: Subtract the total value of assets, from total value of the debts to determine your final assets on valuation day.
Step 4: Determine the total value of assets on marriage day.
Step 5: Determine the total value of debts and liabilities on marriage day.
Step 6: Subtract the value of assets from the liabilities to give you total assets on marriage day.
Step 7: Subtract assets on marriage day from assets on valuation day to give you the NFP of each spouse.
Step 8: Compare the two NFPs, and subtract the lower amount from the higher amount.
Step 9: Divide the difference found in step 8 by 2.
Step 10: The spouse with the lower NFP is the recipient of half the difference of the higher and lower NFP found in step 9. See Table 1 for an example.
Table 1 – Example:
| Spouse 1 | Spouse 2 | |
|---|---|---|
| VALUATION DATE: March 20, 2020 | ||
| 1. Assets on valuation date | Car: $25,000 Bank: $5,000 Matrimonial home: $105,000 ______________________ TOTAL ASSET: $30,000 |
Car: $10,000 Jewellery: $10,000 Matrimonial home: $105,000 ______________________ TOTAL ASSET: $20,000 |
| 2. Debts and liabilities | Student loan: $5,000 ______________________ TOTAL LIABILITY: $5,000 |
Credit card: $2,000 _____________________ TOTAL LIABILITY: $5,000 |
| 3. Subtract asset from liability to obtain the total assets on valuation | ASSET – Liability = $25,000 | ASSET – Liability = $15,000 |
| MARRIAGE DATE: January 15, 2010 | ||
| 4. Assets on marriage date | RRSP: $10,000 ______________________ TOTAL ASSET: $10,000 |
RRSP: $15,000 ______________________ TOTAL ASSET: $15,000 |
| 5. Debts and liabilities on marriage date | Mortgage: $5,000 ______________________ TOTAL LIABILITY: $5,000 |
Mortgage: $10,000 ______________________ TOTAL LIABILITY: $10,000 |
| 6. Subtract asset from liability to obtain total assets on marriage day | ASSET – LIABILITY = $5,000 | ASSET – LIABILITY = $5,000 |
| CALCULATE NFP | ||
| 7. Subtract assets on marriage day from assets on valuation day | $25,000 – $5,000 = $20,000 | $15,000 – $5,000 = $10,000 |
| 8. Subtract the amounts of each spouse | $20,000 – $10,000 = $10,000 | |
| 9. Divide the difference by two | $10,000 / 2 = $5,000 | |
| 10. Owed from spouse 1 to spouse 2 | $5,000 | |
NOTE: This article has been written for general information purposes only and does NOT constitute legal advice. For further questions and/or legal advice please consult a qualified lawyer.