How to divide property if you separate
When a married couple separates, each spouse usually keeps the property they own. But, they share any increase in the value of that property that happened during their marriage.
This means that the spouse who has more property usually pays money to the spouse who has less property. This is called an equalization payment.
In most cases, the time limit to make a claim for an equalization payment is whichever comes first:
- 6 years after you separate, or
- 2 years after you get a divorce.
Equalization payment
To calculate your equalization payment, you and your spouse must first figure out your own net family property (NFP). Here’s how:
Step 1: List and value all your assets and debts on the date your relationship ended. This is the day you separated, or your spouse died. Then, subtract your debts from your assets. Let’s call this amount, Amount A.
Step 2: List and value all your assets and debts on the date you were married. Then, subtract your debts from your assets. Let’s call this amount, Amount B.
Step 3: Subtract Amount B from Amount A. This is your NFP. If your or your spouse’s NFP is a negative amount, it’s counted as zero.
The spouse with the higher NFP pays the other spouse an equalization payment. What they pay is half of the difference between the NFP amounts.
For example, say your spouse’s NFP is $80,000 and your NFP is $50,000. The difference between them is $30,000. Your spouse must pay you an equalization payment of $15,000.
For more information, visit stepstojustice.ca/equalization-payment.
In rare situations where dividing property equally would be unfair, you can agree to divide property unequally. Or, you can go to court and ask a judge to decide.
Special rules
Some assets or debts are treated differently when calculating your NFP. For example, some gifts and inheritances are not included in you NFP.
And Canada Pension Plan credits earned while you were together are always added up and divided equally, if you were together for at least one year.
There are also special rules about your matrimonial home. A matrimonial home is a home that you and your spouse lived in just before you separated.
If one spouse owned the matrimonial home on the date of marriage and on the date your relationship ended, the home’s total value is shared in the equalization payment.
This is unlike other assets where only the increase in value is shared. This can have a big effect on the amount of the equalization payment.
Different rules apply to matrimonial homes on reserve land.
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