NET FAMILY PROPERTY
When couples are getting married or are separating, one question almost always comes up: what rights do we have in each other’s property?
The common belief is that legally married couples own half of each other’s property. In Ontario, this isn’t strictly speaking the case. Under the Family Law Act, the legislation that governs marital property rights in Ontario, those rights are governed under the concepts of net family property and equalization.
In its simplest form, net family property is calculated by taking each spouse’s assets on the date of marriage and subtracting their liabilities as of that date. Then each spouse’s assets minus liabilities must be calculated as of the valuation date. This is usually the date on which the spouses have separated—that is, started living separate and apart from each other with no reasonable prospect of reconciliation.
Equalization is calculated by subtracting the lower amount from the higher amount and dividing the remainder by two. This figure results in the equalization of net family property payable by one spouse to the other. This amount can be paid in cash, transfer of property, or a combination of both.
However, not all property spouses own is treated the same way, nor does it all have to be included in net family property.
Some property is excluded from calculation of net family property and the value thereof not required to be divided on separation. Examples of excluded property include gift or inheritances received during the marriage (but not before), damages or settlements for personal injury, and life insurance proceeds.
The matrimonial home is also treated uniquely, regardless of whether title to the home is the name of one or both spouses. Its value is never deducted or excluded from the calculation of net family property, even if one of the spouses owned it at the date of marriage, or it was inherited during the marriage.
Equalization of net family property also isn’t affected by wrongdoing in the marriage unrelated to family property. Adultery or abuse are not grounds to increase or reduce an equalization payment. But a court can order unequal division if one spouse failed to disclose debts existing at the time of the marriage or ran up debts during the marriage recklessly or in bad faith, particularly to avoid an equalization payment.
Finally, couples can agree through a domestic contract to divide their assets and liabilities unequally, set aside certain property for one spouse, or otherwise settle their property as they see fit.
These are only the basics of net family property and every couple’s financial situation and property holdings are unique. The lawyers at Alemi Law Group are experienced in handling matters related to matrimonial property to help couples reach fair and satisfactory arrangements.
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