How are Finances Distributed Following an Ontario Divorce?
The dissolution of a marriage is always challenging. One of the most uncomfortable parts of a divorce for many couples is the division of the assets they acquired during the marriage. Many people wonder what their finances will look like following a divorce.
The Ontario Family Law Act recognizes that both members of the marriage partnership are responsible for an equal contribution to the family’s finances, regardless of whether one partner was primarily engaged in running the household or the other was a higher earner. Ontario’s property division laws aim to ensure that both individuals exit the divorce with a relatively equal share of the assets jointly acquired during the marriage. However, reaching this equal division of property can be a confusing process for divorced couples. An experienced divorce lawyer can outline how the equalization process works, which assets are subject to division, and under what circumstances an unequal division of assets may be necessary.
What is a Net Family Property (NFP) Calculation?
Before the division of assets can begin, you and your spouse must determine the value of what you own and how much debt you have. A Net Family Property (NFP) calculation, made by filling out Form 13.1, takes you through the process of adding up what you owned in assets on the day you separated from your spouse, then subtracting your debts from that amount.
If you had assets or debts at the time you were married, the value of those items would remain with you after your divorce unless you have an agreement, such as a prenup, that states otherwise.
What May Be Excluded From the NFP?
Some items do not need to be part of the NFP calculations because they are considered personal property instead of jointly owned property. It is the responsibility of the individual requesting the exclusion of items to prove that they meet the necessary criteria. Items potentially eligible for exclusion from NFP include:
- Inheritances or gifts given to you that were kept separate from your marital assets.
- Insurance or personal injury settlement payments.
- Items that you and your spouse agreed not to include in the NFP through a domestic contract.
Keep in mind that an inherited home loses its exclusion once you and your spouse live in it together. At that point, it becomes a marital home. Even if it is a cabin or vacation home, it could be considered a marital home if you spent time in it with your spouse.
How Is the NFP Used to Split Finances?
In most cases, one spouse’s NFP will be higher than the other’s. This may be because they had more earnings or opportunities for investments during the marriage. Through Ontario’s equalization legislation, the spouse with the higher NFP will be responsible for making an “equalization payment” to the other spouse. This payment is generally half the difference between the two NFPs. For example, if one spouse had an NFP of $100,000 and the other had $80,000, then the individual with the higher NFP would be ordered to make a payment of $10,000 to equalize the amounts.
How Is the Ownership of a Matrimonial Home Handled Following a Divorce?
For many couples, their most significant asset is their home. The matrimonial home is given special status under Ontario law and handled differently than other assets, in deference to its importance. A matrimonial home is any residence where you and your spouse lived as a family at the date of separation. This can include both your primary residence and any vacation homes you may own.
Under the law, both spouses have an equal possessory right to the matrimonial home. In most circumstances, you will both retain access to the home until you can come to an agreement about how to split it or a judge rules on the case. A judge may grant exclusive possession (access) to one spouse but often requires payments to be made to the other spouse in lieu of possession. When making rulings regarding control of the home, the judge will consider many factors, including:
- The best interests of any children involved.
- Both spouses’ finances.
- Availability and affordability of other housing.
- Written legal agreements made by the couple.
- Whether violence has been committed against the spouse or children by the other spouse, which could make sharing the home unsafe.
Are Finances Always Split Equally?
While the Family Law Act aims to keep the division of assets as equal as possible, there may be situations where a 50/50 split is unreasonable. Under certain exceptional circumstances, the court may allow an unequal distribution of property.
Examples of qualifying conditions may include:
- One spouse incurred massive debts due to gambling, substance abuse, or bad faith actions that significantly reduced their NFP.
- A valid prenuptial agreement exists that outlines how property should be distributed following a divorce.
- One partner attempted to sell off property or otherwise intentionally reduced their NFP to avoid making an equalization payment.
- One individual was subject to financial abuse during the course of the marriage.
- The spouses were in the marriage for less than five years, and the value of the equalization payment would be unreasonably large, considering the length of the partnership.
- One spouse had large, undisclosed debts at the time of the marriage, which impacted the couple’s finances.
How Can an Experienced Divorce Lawyer Help You?
Dividing your property after a divorce can feel daunting. Unfortunately, tensions can rise as couples go through the process of tallying up assets and debts and calculating their NFP. For those with higher-value assets, family owned businesses, or international properties, the situation can become even more complicated. At Anthony Family Law, our skilled lawyers can address your concerns and help you navigate all aspects of your divorce. Contact our law firm today to schedule a free case evaluation and get the solid legal guidance you deserve: 647-933-2397.