Married spouses (but not unmarried spouses or common law spouses), upon their separation, are entitled to a division of the property acquired by them during cohabitation under the marriage. However, it is not the property, itself, which is divided; it is thevalue of the property. The process involves an accounting of the value in a procedure that creates a debt owed by one spouse to the other, not a right to a physical partition and transfer of actual property. Subject to certain exclusionary rules, property of every kind acquired during the marriage comes into the accounting — the value of land and buildings, bank accounts, pensions, accounts receivable, and everything else the value of which can be expressed in dollars. The property acquired during the marriage can be the increases (gains) in value of property that was owned at the time of the wedding, as well as the value of the several items of property purchased after the wedding. The values used in the division process are net of debts and liabilities; that is, the debts and liabilities are deducted from the positive value of the property. To calculate the payment owing by one spouse to the other, an accounting is made of the “net family property for each spouse”. Generally speaking, net family property is a spouse’s net worth (assets less liabilities) at time of separation less the spouse’s net worth at the time of the wedding (except for a matrimonial home that is owned at the time of the wedding). In the ordinary case, the debt created or the payment that is owing is one-half the difference between the greater net family property and the lesser net family property. The spouse with the greater net family property owes this amount to the other spouse. Because this payment balances the values of the property holdings of the spouses, the payment is called an “equalization payment.” Where an equalization payment would be “unconscionable” the division of the difference between the net family properties is adjusted to be more or less than one-half. An example of a calculation of an equalization payment is:
| Husband | Wife | |
| Value of property, date of separation | $200,000 | $350,000 |
| Value of property, date of marriage | 15,000 | 50,000 |
| Net family property | $185,000 | $300,000 |
| Difference between nfp’s $115,000 ($300,000 – $185,000 = $115,000) One-half the difference is $57,500 ($115,000 / 2 = $57,500) |
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| Wife pays this amount to Husband | 57,500 | (57,500) |
| Value of holdings after equalization payment | $242,500 | $242,500 |
Gary Joseph and Michael Stangarone are lawyers with Toronto’s MacDonald & Partners family-law firm.
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