Separation and Divorce or Death of a Spouse: Property Division
If a married couple separates, one spouse usually must pay the other spouse money called an "equalization payment". There are 2 main steps to figuring out the amount of the equalization payment:
Each spouse must calculate his or her net family property (NFP). To do this, each spouse adds up the value of his or her property (less any debts) on the date of separation and subtracts the value of his or her property (less any debts) on the date of marriage. Here is an example:
How to calculate net family property (NFP)
|Now (separation date)||$100,000|
|Then (marriage date)||$20,000|
|Now minus Then||$80,000|
|So NFP for Spouse A is $80,000|
|Now (separation date)||$55,000|
|Then (marriage date)||$25,000|
|Now minus Then||$30,000|
|So NFP for Spouse B is $30,000|
The spouse with the higher NFP then pays the other spouse half of the difference. This is the equalization payment. Here is an example:
|How to calculate equalization payment|
|Spouse A net family property||$80,000|
|Spouse B net family property||$30,000|
|Spouse A minus Spouse B||$50,000|
|$50,000 divided in half = $25,000|
Spouse A pays $25,000 to Spouse B
Special rule for matrimonial homes:
A "matrimonial home” is a home where a married couple had been living together just before they separated. There can be more than one matrimonial home, for example, a cottage could be included.
When calculating a spouse's NFP, the value of his or her property on the date of marriage does not include any home that is a matrimonial home on the date of separation. This means if the same spouse still owns the home on the date of separation, his or her NFP will include the home's total value, not just its change in value. This can have a big effect on which spouse must pay equalization and how much.
It is hard to know in advance if a particular home will be considered a matrimonial home because a couple may not know where they will be living if and when they separate.
Special rule for gifts and inheritances:
Any gift or inheritance that a spouse received during the marriage is not usually included in their NFP calculation. But if the gift or inheritance was used to buy or help pay for a matrimonial home, it is included.
Special rule for Canada Pension Plan credits:
These credits are not included in the NFP calculation because they are divided separately. See Canada Pension Plan credits to find out how to divide these credits.