Family Primer Series – Division of Family Property

Family property rights in Ontario applies only between married individuals. Common law couples in Ontario have no right to division of family property under the Family Law Act, though they may be eligible for spousal support and may also be able to make a civil claim against their spouse post-separation[1].

The rules governing the division of family property are addressed at Part I and Part II of the Family Law Act. In simple terms, ‘family property’ includes all non-exempt[2] property owned by the couple at the date of separation.

The first step is to establish property owned by a spouse on the date of marriage (with the exception of the matrimonial home). As only the value of assets acquired during the marriage are considered in the matrimonial property calculation, this figure must be established.

Certain traceable property (except an interest in the matrimonial home) including general damages in personal injury cases, inheritances, exclusive gifts, life insurance proceeds, and some other kinds of property are exempt from division. The key word here is ‘traceable’ – if the original asset cannot be traced from the date of marriage to the date of separation, it should not be excluded from division. Traceability is determined in accordance with trust accounting rules, and determining what is and what is not traceable can be difficult to determine. If you would like to learn more about which property is or is not exempt from family property division, you should contact a lawyer.

A party’s ‘net family property’ is equal to all family property in the possession of that party, less any family debts assumed by them.

Under normal circumstances, the process for dividing family property can be described as follows:

  1. Each party’s pre-marital assets are calculated.
  2. Each party’s ‘net family property’ is calculated.
  3. Any exempt assets, such as inheritances and personal injury awards for pain and suffering, are calculated.
  4. Subtract the pre-marital assets and exempt assets for each party from their net family property.
  5. Half of the difference between the parties’ respective net family property amounts is transferred to the lower net family property holder. This is commonly referred to as an “equalization payment”.

For example, if spouse A has $100,000 in net family property, and spouse B has $50,000 in net family property, spouse A would transfer $25,000 in value to spouse B in equalization.

The general rule is that family property is divided equally between parties. However, in some limited circumstances the judge has discretion to order other than a 50/50 division of net family property. A request for unequal division may be considered, for example, where there has been inadequate disclosure of assets, where a party has been found to dissipate family assets, a spouse failed to disclose debts at the date of the marriage, or where the parties have lived together for less than 5 years.

Determining which spouse gets what property is usually determined by consent between spouses. In a dispute, normal property law usually applies between spouses, except where they conflict with the Family Law Act. The notable exception under the Family Law Act is the matrimonial home. Where the parties cannot agree, the general rule is that the spouse who owns the item according to the rules of civil property law will have a presumptive claim to it. I note that this rule applies to pets, wedding rings, and other gifts. Similarly, an engagement ring is a gift given prior to and in contemplation of marriage – the presumptive rules is that the engagement ring is the property of the recipient and is exempt from property division (as it is a pre-marital asset).  Obviously, this can get tricky where spouses jointly own property.

For most spouses, a matrimonial home is likely to be their single largest asset. Under the Act, the family home is dealt with differently than other kinds of family property. A matrimonial home is defined at section 18 of the Family Law Act as “every property in which a person has an interest and that is, or if the spouses have separated, was at the time of separation ordinarily occupied by the person and his or her spouse as the family residence.” This definition contemplates that spouses may have multiple “matrimonial homes”, and includes cottages, trailers, and other premises ordinarily owned and occupied by the spouses, regardless of which spouse holds title.

As previously stated, the matrimonial home is dealt with separately from other kinds of property. Both parties have an equal right to possession of the matrimonial home pending an agreement between spouses or an order of the court, regardless of who holds title to the home. A matrimonial home is never excluded from family property. In addition, neither spouse may dispose of or encumber their interest in the matrimonial home, and in some circumstances a spouse can unwind a transaction regarding the matrimonial home that they have not consented to.  As a general rule, every spouse has an equal right to the net proceeds of disposition of the family home, regardless of other family property.

Finally, there is an important intersection between family law end estate law that should be addressed briefly. Where a married person passes away, their spouse has a right to elect either to take their share of the deceased’s estate under their spouse’s will (or under the rules of intestacy if their spouse has no will), or make a family property division claim as of the date of death. This is a very fact-sensitive decision, and the choice to make a Family Property Act election should not be made lightly. If you require information about making an election in a deceased spouse’s estate, you should seek advice from a qualified lawyer.

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[1] An individual in a common-law partner may be able to claim an amount of money through the law of unjust enrichment and constructive trust. Feel free to contact us further if you would like more information about this topic.

[2] See s. 4(2) of the Family Law Act for a full list of property exempt from calculation of net family property.

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