Divorce and separation: How are family assets divided?

What are the differences between divorce and separation? 

Whether you're married or not, if you've separated and lived apart for more than 90 days without potential for reconciliation, for tax purposes, the Canada Revenue Agency considers that your relationship is over.  

As soon as your tax situation changes, you may be entitled to benefits based on your new individual net income. There are also other consequences. For example, you will no longer be able to share certain tax credits or split your pension income.  

Divorce and separation 

If you are still married but no longer living together, this is called a de facto separation. This is different from a legal separation, which requires a court judgment.  

Legal separation is similar to divorce in many ways. Because you’re still married, you can’t marry someone else. But legal separation is an opportunity to make decisions about support payments, if applicable, and how to divide family assets.  

When you divorce, all ties between the two spouses are severed in the eyes of the law, as well as for tax purposes. Like legal separation, divorce requires a court judgment.   

Find out how much it costs to get a divorce. 

Common-law and parental unions 

The legal rules governing common‑law relationships (also known as “de facto” unions) vary from one province or territory to another. To understand how the law applies to your situation, it’s important to consult the legislation in your province or territory. Seeking advice from a legal professional is also strongly recommended. 

In Quebec, common‑law partners do not benefit from the same legal framework as married couples. There is no division of family property and no financial obligations between former partners following a separation. In other words, each person leaves the relationship with their own assets. 

That said, parental responsibilities remain unchanged. When common‑law parents separate, both parents are still required to support their children. 

However, Québec has recently introduced new rules. Bill 56—legislation governing parental unions—automatically applies to all common‑law couples who adopted a child or whose child was born on or after June 29, 2025. Couples may opt out of this regime, but only by mutual agreement through a notarized deed. 

The goal of this legislation is to ensure that children receive the same rights and protections, regardless of their parents’ marital status. It includes several key measures, such as: 

• The creation of a parental union property that includes the family residence, household furnishings, and vehicles used for family transportation 
• Protection of the family home, similar to that provided to married spouses 
• The possibility for one parent to claim compensatory support in the event of separation 
• Inheritance rights in the event of a co‑parent’s death, even without a will 

To clearly define expectations and protect both partners in case of a breakup, it’s wise to put a cohabitation agreement in place. 

Civil union 

Quebec introduced civil unions in the early 2000s, before same-sex couples were able to marry. Civil unions are open to everyone, regardless of their sex. They are very similar to marriage but may not be recognized outside of Quebec.   

How will property be separated during a divorce or separation? 

What is family patrimony and what are the rules for dividing property? 

The separation of property depends on the couple's legal status (marriage, common-law union or civil union), the matrimonial regime in the case of marriage, and the province or territory of residence. 

The law requires that the net value of the family patrimony (taking debts into account) be divided equally in a divorce. This means that you may have to split the value of the following assets (or purchase the other share): 

• The family's residences (house, cottage, vacation home abroad, travel trailer, etc.) 
• The furniture and items inside these residences 
• The family's vehicles 
• Retirement savings (employer plans, government pensions, RRSPs, LIRAs, RRIFs) 
• Joint debts used to acquire, maintain or preserve assets included in the family patrimony 

Be aware that the assets, like a residence, must be valued and exchanged at their fair market value. 

Are any assets excluded from sharing? 

All assets that are not specifically designated as part of the family patrimony are excluded from division. Some examples include: 

• Investment properties 
• Businesses 
• Cash, bank accounts, stocks, bonds, and savings being held for purposes other than retirement (ex: funds held in a TFSA) 
• Jewelry and other personal belongings 
• Money, property, and goods received as a gift or inheritance. In some cases, it can be helpful to include a specific clause in the will 

As a general rule, each person remains the owner of the assets they acquired before the marriage. That being said, there are exceptions. Certain assets may still need to be shared, even if they are not part of the family patrimony.  

A marriage contract can be used to clarify these issues and set out specific conditions for the division of assets excluded from the family patrimony. 

How are debts divided? 

Regardless of your relationship status, you are not responsible for the other person’s personal debts or bankruptcy unless you’re a co-signer or guarantor. 

The only debts that will be divided are joint ones, such as a line of credit in both names. If one of the people cannot pay their share, the other may become required to repay the full amount owed.  

What are the basic rules for dividing shared property? 

1. The first step is determining the value of the assets that will be divided. In case of divorce, each spouse is entitled to half the value of the family patrimony accumulated during the course of the marriage. 
2. You must then calculate the net value of the family patrimony by subtracting outstanding debts, such as a mortgage or car loan. 
3. Then, you must deduct the value of the assets owned before the marriage, as well as any money received as a gift or inheritance that was used to pay for family patrimony assets. For example, if you owned the family home before getting married, you may be entitled to recover your initial investment. 
4. It’s vital to remember to account for any increase or decrease in an asset’s value during the marriage. Any increase in value is shared proportionally based on what each person had already paid at the time of marriage.  

For example, if you had already paid 15% of your mortgage before getting married, you would be entitled to recover that amount, plus 15% of the increase in the home’s value during the marriage. 

Is it possible to avoid family assets being divided? 

In parts of Canada, it’s possible to renounce your right to the division of family patrimony at the time of separation or upon the death of a spouse, but not in advance. One spouse cannot force the other to renounce these rights.  

This must be done in the presence of a notary or by court declaration and may need to be officially registered.  

Take the time to consult experts in your province or territory to understand all the rules that apply to your situation.  

What does it mean to split the market value of assets? 

Here’s an example: After completing a financial assessment of the family patrimony, a couple determines that one person owes the other $100,000. That amount may be paid as a cash transfer or through the transfer of a share in a property. 

What to do if one spouse dies 

When one spouse dies, the family patrimony must be divided, and the matrimonial regime settled before the remainder of the estate is distributed. The rules governing the family patrimony take precedence over provisions in a will.  

Who to notify in the event of divorce or separation 

In the event of a separation or divorce, you must notify the federal government and your provincial (or territorial) government by the end of the month following the change in marital status. In many cases, this can be done online. 

You’ll find the relevant page on the Canada Revenue Agency’s website. 

A change in marital status often affects your taxes. Since your next tax return will be filed separately from your former spouse, you may become eligible for benefits you were not entitled to before, such as the Canada Child Benefit (federal and provincial, where applicable), the Guaranteed Income Supplement, the GST credit, or the eligible dependent credit. 

Also remember to: 

• Update your insurance policies (life, disability, health, etc.) 
• Review your will 
• Update your incapacity or protection mandates 
• Change your emergency contacts 
• Notify shared service providers if needed (electricity, internet, etc.) 

There is no perfect advice for getting through a separation—it is often a difficult time. That said, we can help you understand how to divide your assets properly, connect you with the right professionals (lawyer, accountant, notary, etc.), notify the proper authorities, and explain the impact on your finances and taxes. 

Book an appointment with a financial planner today.