Property Division in Ontario

Dividing Property upon Separation and Divorce or the Decease of a Spouse

According to the Canadian constitution, each province may establish rules for dividing properties for couples who are married or who have common-law status when the relationship ends or one of the partners dies.

This article is specific to the laws in Ontario. In other provinces within Canada, laws on property may vary significantly; some are similar to the provisions that govern this matter in Ontario, while other provinces have laws that differ somewhat widely.

Separation and Divorce

There is a significant difference under the law for couples who were married and couples who lived common law when it comes to the division of property. If a couple has been married, they automatically share the common value of their property upon separation or if one passes away. Common-law couples do not have that automatic standing.

How are living common law and being married different?

If you are “married,” that means you have gone through a marriage ceremony with your partner that is legally recognized.

If you live “common-law,” you reside with your partner as spouses, but you have not gone through a legally recognized ceremony.

No matter how long you live together, or if you have children together, you are still not legally married to one another. Even if you refer to your partner as your “spouse,” that does not confer legal marriage on your relationship. If this describes you, then you are a “common law” couple. The reason for this designation is that the common law governs your property rights if the relationship comes to an end. In Ontario, there is no legislation covering property rights for common law couples.

So what does “property” mean?

The Family Law Act, R.S.O. 1990, c.F.3 defines “property” as any sort of interest, future or present, contingent or vested, in personal or real property. This includes property in which a spouse has a power of appointment, either solely or jointly with another person, that is exercisable in his or her favor. It also includes property that a spouse has disposed of but retains the right to revoke that disposition. It also includes the imputed value of a spouse’s interest in a pension plan, from the time period from the marriage date until the date when the value was calculated.

In lay terms, property is everything that you own. Houses, cars, other real estate, personal items, household items, bank accounts, savings accounts, pensions, investments, commissions due in the future and any businesses are all considered property.

In general, how does property go through division for married couples?

If you are married, you and your spouse share joint responsibility for managing your household, bringing in money and taking care of children during your marriage Ontario law views marriage as an equal partnership, and so when that partnership ends, it is necessary to divide the property.

Because the law considers the contributions from each partner to the marriage to have equal value, in general terms, all property that you acquire while you are married and that you still have at the point of separation should go through a 50-50 division. This includes the wealth that you gained during marriage, as well as property that you accumulated together. If you calculate the net worth of your combined property at the time when you separate and find the difference between that and your combined net worth of property when you are married, that difference is called “net family property.”

In Ontario, the Family Law Act governs the rights that spouses and their dependents have to follow when dividing property and dealing with such issues as support, prenuptial agreements, separation covenants and other issues with family law. At separation, the partners in a marriage will generally keep their own property, but if property has increased in value, they share in that increase. This usually results in one spouse giving the other an “equalization payment” to rectify an imbalance in the property values. This is a complex legal area, and the best person to discuss your individual situation with you is a family lawyer.

What changes did the current Family Law Act bring that changed matters under the former Family Law Reform Act?

The existing Family Law Act was passed in 1986, replacing the Family Law Reform Act. Under the former law, all property was considered “family assets” no matter who actually owned them. For the most part, these assets were split equally between spouses, no matter who had the title to each asset.

With the Family Law Act, legal title was then recognized for dividing property. The law includes provisions about the home in which the couple lives so that a spouse not on the title would have access to some rights. The primary home in which the couple lives is not considered jointly owned. The owner accounts for the home’s full value when it comes to dividing the property, but both parties have an equal right to live in the home.

Does the property division rule cover all forms of property?

The Family Law Act defines exclusions from marital property in Section 4(2). These exclusions include money that you received from an insurance company upon some else’s death, money that you either received or are still entitled to receive because of a personal injury settlement or verdict, money or property that you inherited while married, and gifts that someone beside your spouse gave you while you were married.

If one spouse inherits a vacation home while the couple is married, that property’s value is not part of the marital estate, because it does not come from work that the couple did while married. Your family home is also an exception. No matter who held title to the family home before you were married, it is considered a joint asset.

If you have invested money in that family home, you have to share its value, no matter where the money came from. Even if the home is solely in your name, you may not keep what the house was appraised for when you got married.

How long do you have to make an equalization payment claim?

You have six years after separation or two years after divorce, whichever happens sooner. A court may grant more time in some cases.

How does the equalization process take place?

First, each partner should figure up the total value of his or her share of the overall family property, and both must be fair and honest. If the divorce ends up going before a judge, you have to put together a complete financial report of all your income, debts and property and swear to its accuracy.

When a married couple separates, one spouse generally pas the other an “equalization payment.” After you have calculated the difference between your property value at separation and the property value at marriage, and your spouse calculates the difference for him or her, then the spouse with higher property value gives the other spouse half of the difference between their values.

The payment can take the form of cash, or it can take the form of property in the requisite value. You and your former spouse can agree on how to make the payment or leave it up to the court to decide.

It is important to remember that your right is to a payment value, not a specific property.

What rule applies to matrimonial dwellings?

The property (or properties) where the two of you live just before separation is a “matrimonial home.” When you calculate the value of your property, the value of this home or homes does not appear on either spouse’s value sheet at the date of marriage. The spouse that own it at separation has to account for the whole value on his or her value sheet, not the simple difference in value between marriage and separation. This impacts the amount of the equalization payment significantly.

If you used a gift or inheritance to contribute to the purchase of a matrimonial home, then the amount that you contributed rolls into the home’s value. Otherwise, that gift or inheritance is considered separate property.

If you made improvements to the home that led to an increase in the home’s value, and you used separate funds to pay for the improvements, you still have to include the entire increase in value in your calculation of the matrimonial home’s worth.

If you received an expensive gift separately, you don’t have to add that value to your common property. However, if you sold that gift and used the proceeds to contribute to the value of the home, either through the down payment, later principal payments or improvements, the increase in value to the home is part of your common property.

My husband had an affair and is now with another woman. Why does he get half of the value of my property?

The law about property division does not recognize reasons for separation. It doesn’t matter why your relationship ended; the marriage was an equal partnership, and you have to divide the wealth evenly, no matter whose fault the divorce is. It is very rare for a spouse’s behavior to influence disposition of property.

If I win the lottery one day after separation, do I have to share those winnings?

After legal separation, what you win is all yours, unless your spouse contributed to the ticket purchase.

How does property division take place for common law couples?

Ontario law does not recognize a common law relationship when it comes to shared property. Whatever you bring into a common law relationship remains yours, including any increase in value that takes place while you two are together. That means there is no automatic right of division if you separate. You can request that a spouse reimburse you if you contribute to property owned by your spouse, and you have the right to sue if your common law spouse refuses. However, that is covered by other areas of civil law – not family law.

In many cases, courts in Ontario have found grounds for some sort of equalization compensation between common law spouses after separation, using unjust enrichment and quantum meruit in their findings.

If you want to have your claim for what is known as enrichment relief granted, you must be able to prove that you provided some sort of benefit to the other spouse, and that separation has led to some sort of economic loss. You also have to prove that there is no legal reason for the other spouse not to honor your claim.

What does “joint family venture” mean within the context of a common law marriage?

In Kerr v Baranow, 2011 SCC 10, the Supreme Court of Canada gave common law relationships containing unjust enrichment entitlement as a “joint family venture,” or JFV. The claiming spouse was required to show that a joint family venture had existed and that a link existed between that spouse’s contribution to that venture and the acquisition of wealth. Some factors in establishing a JFV include:

  • Combining work together
  • Choosing to have a family together
  • Duration of the relationship
  • Contribution money into a common pool
  • Using funds for family purposes
  • Sharing expenses and savings commonly as a family
  • One spouse leaving the workforce to care for children, or relocating to benefit the other spouse

How does the difference between “married” and “common law” affect the disposition of the matrimonial home?

The place where you and your legal spouse live at separation is the “matrimonial home.” You can have more than one “matrimonial home” – the most common example is a sort of vacation home. Both spouses have an equal right to stay in that home until its selling or a court order provides otherwise, no matter who holds the legal title. Neither spouse can mortgage or sell this home(s) without the other’s permission in writing.

This does not apply to common law spouses. If your name is not on the title, you do not always have the right to live there after separation. If your name is the only one on the title, you can sell or mortgage it independently of the other spouse’s permission.

How are debts divided at divorce and separation?

Whether you are legally married or in a common law relationship, you have to repay your own debts unless an agreement says otherwise. If both of your signatures are on a loan, you share responsibility. You can be held liable individually even if the other person defaults on it. Debts go into the consideration of net family property for legally married couples.

Can couples make binding written agreements about dividing property?

You can make a “cohabitation agreement” (if you are common law) or a “marriage contract” (if you are legally married). This lays out how you will manage your affairs during marriage and how you plan to divide things if you end up separating. You should each get your own legal advice and make an accounting of your financial situation before entering this agreement. You must sign it in front of a witness (who also signs it) to make the agreement binding. If your relationship has already come to an end, you can also make your own separation agreement.

In most cases, judges will leave these agreement alone, unless it can be determined that one spouse lied about finances or failed to understand the agreement.

What happens to pension plans during separation and divorce?

Pensions should be included when family property at separation is calculated. This goes into the summation of all of your other property and should be a part of your equalization calculations. Your entitlement to part of your spouse’s pension ends automatically when you separate, though.

If you two lived together for at least a year, the Canada Pension Plan (CPP) credits that you both earned can be added up and then even split at separation. This is referred to as a credit split or a “Division of Unadjusted Pensionable Earning” (DUPE). This could help you qualify for a pension if your spouse earned more than you, or you could get more of a pension if you have already qualified.

If you were legally married, there is no time limit for applying for a DUPE. However, if your spouse passed away after you separated and you never went through full divorce, you only have three years after the decease of your spouse to apply.

What happens to property if one legally married spouse passes away?

If the spouse left a will, you can either take the property that you received in the will as a bequest and the property that you owned jointly, or you can use the same rules that apply for separating couples. These rules can help you significantly if your spouse left most of his property to other relatives or people outside the family. If you choose to use the rules of separation, make a list of the property in the same way that you would upon separation, according to its value at the decease of your spouse. If the deceased faced a legal obligation to support a child or a former spouse, the will has to leave enough to meet that obligation. IF it does not, they can go to court to request an alteration to the will.

If the spouse did not leave a will, then the Succession Law Reform Act governs the distribution of property. As the surviving spouse, you can either go by those provisions or request to follow the rules of separation.

If your spouse was the sole owner of your family home and left it to someone else, you have 60 days to move out, but you do not have to pay rent for those 60 days.

DISCLAIMER: This is just an information article and is not written as legal advice. Make sure to consult an attorney to receive independent legal advice (ILA) about your own situation.

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