Valuing and Dividing Property
Posted in Ontario Law by Andrew J. Kania, LL.B., LL.M. on July 30, 2015
In Ontario, the treatment of property division is presumptively different depending on whether or not a couple is legally married.
Married couples are entitled to an equalization of their net family property (“NFP”) upon the breakdown of the marriage in accordance with the Family Law Act, while non-married persons do not have a legislated entitlement to property division under the Family Law Act 1 and must instead rely on Judge made common law.
When considering property division for legally married persons there are two important dates. The first date is the day of marriage. The second date is the exact day of separation. Both parties are required to swear a Financial Statement, which is a Court form, outlining all of their respective assets and debts on both of the aforesaid two dates. This includes assets such as business interests, the matrimonial home, any pension, bank account values, RRSP values, to name a few. Complex property often requires the assistance of an expert to value a party’s interest.
The Family Law Act sets out the time during which a party seeking a claim for equalization has to bring that claim forward. The time to bring the claim runs out at the earliest of six (6) years from the date that the parties separated, two (2) years from the date a divorce order was granted, or six (6) months after the death of one of the spouses 2. This is known as a three part limitation period.
The values at the date of marriage are important as the Family Law Act takes into account any assets or debts that were brought into the marriage. Such values are known as “deductions” and there are specified rules for how such amounts are treated. If, for example, a spouse held $25,000.00 in their bank account on the date of marriage, that amount would be deducted from their net family property by $25,000.00 for the purpose of equalization, regardless of whether that amount still exists on the date of separation. The matrimonial home is treated differently from other assets and a person who owned a matrimonial home on the date of marriage should advise their lawyer of this fact, so that the special treatment rules under the Family Law Act are carefully considered to determine whether a deduction applies to them based on their facts.
The Family Law Act also allows for exemptions for certain property such as gifts, inheritances, damages from personal injury and life insurance proceeds acquired during the course of the marriage 3. Such categories are known as “exclusions” and are treated differently than deductions. As one example only, exclusions must exist on the date of separation in order for a person to obtain a credit, so to speak, unlike the above noted deductions.
A claim can also be made that one party is entitled to either a smaller or larger share of the net family property. The threshold needed to make this claim is often quite high and the court looks at a variety of factors including, but not limited to, a spouse intentionally depleting their property, a spouse incurring debt in bad faith, or a written agreement entered into between the parties. These are known as section 5(6) exceptions4.
Non – Married Persons Who Have Lived Together In A Relationship Of Some Permanence (Also Known As “Common Law”)
As stated above, persons who are not legally married do not have a legislated entitlement to a division of family property; however an unjust enrichment or trust claim can be made to attempt to achieve similar results. These claims usually involve one party alleging that the other party was unjustly enriched through their actions and as such is entitled to at least some part of the property held in the other party’s name. Such claims are dependent on the Judge made common law, and thus a person who is not legally married, but who has lived in a relationship of some permanence, should speak with a lawyer to seek advice as to whether their facts may entitle them to Judge made protection, in terms of property division, under the Judge made common law.
Both legally married persons and persons who are not legally married but living together in a relationship of some permanence have the legal right to pursue property division upon the ending of their relationship. The results applicable will obviously vary depending on their unique facts; however what is clear is that if you fall into one of the two above noted categories you need to speak with a lawyer, upon the breakdown of your relationship, to protect your legal rights.
(The information provided above is general, not legal advice, as circumstances vary from case to case. As well, generally speaking, the above information relates to Ontario law.
2 Family Law Act, RSO 1990, c F.3 at s. 7(3)
3 Family Law Act, RSO 1990, c F.3 at s. 4(2)
4 Family Law Act, RSO 1990, c F.3 at s. 5(6)