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Under the Family Law Act, any property amassed during the marriage that still exists at separation will be divided equally. Increases in value of property and assets owned at the date of marriage are also equally shared. Property is also a very important issue in family law because, unlike custody or support, property judgments or agreements cannot be changed unless someone does not properly disclose all his or her owned property. It is very important that all property of all kinds be disclosed to the other party (and the court when there is a case) when dealing with property issues. You can assist a Modern Family Law lawyer by being organized.
This process is called equalization of net family property. The spouse with the higher net family property pays the spouse with the lower net family property half of the difference. This payment is the equalization payment.
In BC, the rules about the division of family property apply to both married couples and unmarried couples who have been living together in a marriage-like relationship for at least two years.
There are two categories of property:
Family property, with few exceptions, is considered to be all property acquired by either spouse during the course of the marriage, and still existing at the date of separation. It is important to note that the division is based on the total value of the family property at the time of separation or divorce.
The court forms on this site dealing with family property and the legal information in this section apply only to spouses as defined under The Family Property Act. In some circumstances unmarried individuals who have lived together less than two years may still have a claim regarding property somehow tied to the relationship. However, the law that applies in these situations is far less clear and varies depending on the individual circumstances.
Section 85(1) of the Family Law Act (“FLA”) defines “Excluded Property”, which is exempt from division between spouses after the marriage breaks down property acquired prior to the beginning of the relationship inheritances settlements or awards of damages insurance policy proceeds trust property and property derived from Excluded Property. However, Section 84(2)(g) provides that any increase in value of Excluded Property during the relationship is family property.
The Act defines net family property as the value of the property that each spouse owns on the valuation date, after deducting debts and liabilities, net of the value of property at the date of marriage, after deducting debts and liabilities. The values will then be compared to produce an equalization payment. The general rule is that the spouse whose net family property is the lesser of the two net family properties will be entitled to one-half the difference between them.
Common-law couples are not covered by the equalization provisions in the Family Law Act. As such, in the event of a breakdown in a relationship, the property rights of common-law couples are much different than those of married couples. However, while a common-law spouse is not entitled to an equalization payment, they may be entitled to compensation for direct or indirect contributions to property that a spouse owns. This may include contributions made to the home (e.g. helping to pay the mortgage, paying for renovations or repairs) or a business (e.g. working for a partner’s business).
Contrary to a common misconception, married couples do not acquire an interest in each other’s property just by virtue of being married, and the law does not require division of individually owned property upon marriage breakdown. Instead, in Ontario, the Family Law Act entitles separating legally married spouses to seek an “equalization of net family property”. This means, broadly speaking, that increases in net worth of each spouse over the course of the marriage are equalized by a cash payment from one to the other. It is not assets that are shared, but rather the increase in net worth occurring during the marriage. Note that this applies only to legally married spouses. Common Law spouses, no matter the duration of their relationship, are not covered by the equalization of net family property provisions.
Under the S. 5(1) of the Family Law Act (“FLA“) provides for Equalization when:
Under the s. 5(1) of the FLA, separating spouses must equalize their respective net family properties once determined as set out above. The spouse whose net family property is the lesser of the two net family properties is entitled to one-half the difference between the two net family properties (i.e., 50% of the difference).
If a spouse dies, the surviving spouse is entitled to elect to take under the will or the laws of intestacy under the Succession Law Reform Act (“SLRA”), or pursue an equalization claim under the FLA. If no election is filed, the surviving spouse is deemed to have elected to take under the will or the SLRA, or both, unless a court orders otherwise.
The division of property and assets can be complex. Our team of experienced business, corporate, real estate, and gift lawyers are uniquely situated to assess clients with complex property division issues. If you are contemplating a separation, or have already begun the process, contact us as soon as possible. Obtain experienced legal guidance and ensure that you receive a fair division of your property and assets.
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