Once the decision is made to divorce, a couple must consider how they will divide their assets. Whether you are married or in a civil union, this is an essential step. Here’s what you should know to avoid any surprises when it comes time to divide your assets.
Family patrimony is defined as the group of assets shared between partners who decide to end their marriage or common-law union. You should be aware that some assets are automatically included in the family patrimony, no matter who they belong to. These include:
Most pension plans are part of the patrimony. Such is the case for profit-sharing plans, supplementary annuity agreements for high-income earners and unregistered annuity contracts (purchased with funds that did not come from a pension plan).
Anything that is not designated as part of the family patrimony is excluded: income properties, businesses, money in the bank, stocks, bonds, jewellery and other personal property, etc. The same applies for money and property received as a gift or inheritance.
However, keep in mind that some assets not included in the family patrimony may have to be shared under the terms of your matrimonial regime. A marriage contract can outline details for the consideration of possible additional property.
In Ontario, when a marriage is dissolved, each person’s contribution to the marriage is taken into account. Any property, or its equivalent value, acquired throughout the marriage that still exists at the end of the marriage must be divided equally. And, if any property owned by either spouse at the beginning of the marriage has seen an increase in value during the duration of the marriage, that gain must also be shared. For this sharing to happen, a settlement may be due to one of the spouses, and that settlement is called an equalization payment, or an equalization of net family property.
Exceptions exist, of course. Gifts or inheritances received throughout the marriage from a person other than a spouse and not used towards the marital home may be considered excluded property and may not be included in such a settlement.
When a couple divorces, each partner has the right to half of the cash value of the family patrimony acquired during their life together. To determine this amount, the first thing you need to do is figure out the market value of your assets.
The second step is to calculate the net value of the patrimony, less any debts (mortgage, car loan, etc.).
Next, if applicable, the value of the assets at the time of the marriage must be deducted, as well as money received as a gift or inheritance that was used to pay for family property. For example, if your house belonged to you before the marriage, you could recover your investment when dividing assets.
You must also consider the added value of the property, i.e., the increase of its value during the marriage. Spouses share the added value by respecting the proportions of the amounts they already paid at the time of marriage. For example, if you have already paid back 15% of your mortgage during the marriage, you could recover this amount plus 15% of the added value acquired during the union.
During their marriage, they purchased a home for $200,000. They financed their $50,000 downpayment with money Delphine received as inheritance. Today, the house is valued at $280,000 and the couple has a remaining mortgage of $100,000.
The net value of Charles’s and Delphine’s patrimony would be calculated as follows:
$280,000 - $100,000 (mortgage) = $180,000
From this amount, subtract the $50,000 from Delphine’s inheritance and the home’s added value in proportion to this amount: $50,000 + ($80,000 x 25% of the downpayment) = $70,000.
Therefore, $180,000 - $70,000 = $110,000 to be shared.
Charles is entitled to $55,000 and Delphine to $125,000 ($55,000 + $70,000).
$15,000 value, i.e., $7,500 each.
$12,000 - $4,000 (car loan balance) = $8,000, i.e., $4,000 each.
Charles’s pension fund
Charles has $70,000 in his pension fund. From this amount, deduct $30,000 in rights and interests that Charles accumulated before his marriage and are not shareable:
$70,000 - $30,000 = $40,000 to divide in two.
Charles will keep $50,000 ($30,000 + $20,000) and give Delphine $20,000.
In the end, Charles’s half of the assets will total $116,500 and Delphine’s will total $156,500.
The deadline to opt out of family patrimony laws was December 31, 1990. A spouse who realizes today that it was not in their interest can no longer review their decision. However, if this is your case and you have waived your share under threat or breach of trust, the waiver could be annulled by a judge. Speak with a lawyer for more information.
However, it is still possible to waive your rights to share at the moment of separation or the death of your spouse, but your partner is not obligated to do the same. The waiver is done before a notary and must be registered with the Registre des droits personnels et reels mobiliers.
You should also know that, upon your partner’s death, you are obligated to share the family patrimony before managing the rest of the estate. Family patrimony laws always take precedence over the terms of a will.
If you say, “I do,” a second or third time, you are still required to respect family patrimony laws. However, remember that if things fall apart, only the assets acquired during the marriage or common-law union must be shared, unless other terms are outlined in your matrimonial regime.
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