Personal
Home Bank accounts
Credit cards
Borrowing
Mortgages
Savings and investments
Insurance
Advice
Business
Home Banking Solutions
International
Financing
Investing
Going Further
Tips and Tools
Wealth Management
Home
CLOSE

Property Division in a Divorce

17 May 2019 by National Bank
Dividing the family patrimony

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.

What does family patrimony include?

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:

  • Residences used by the family (house, cottage, condo in Florida, camping trailer, etc.)
  • Furniture and other objects found in the home
  • Motor vehicles used for family travel
  • Money accumulated in a pension plan during the marriage: RRSP, Quebec Pension Plan, employer pension funds, etc.

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).

What assets are excluded from the family patrimony?

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.

Is Ontario law different from Quebec?

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.

Determine the value of what will be shared

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.

Context: Charles and Delphine are divorcing

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:

House

$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).

Furniture

$15,000 value, i.e., $7,500 each.

Car

$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.

Is it possible to avoid dividing the family patrimony?

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.

What if you find love again?

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.

Legal disclaimer

Any reproduction, in whole or in part, is strictly prohibited without the prior written consent of National Bank of Canada.

The articles and information on this website are protected by the copyright laws in effect in Canada or other countries, as applicable. The copyrights on the articles and information belong to the National Bank of Canada or other persons. Any reproduction, redistribution, electronic communication, including indirectly via a hyperlink, in whole or in part, of these articles and information and any other use thereof that is not explicitly authorized is prohibited without the prior written consent of the copyright owner.

The contents of this website must not be interpreted, considered or used as if it were financial, legal, fiscal, or other advice. National Bank and its partners in contents will not be liable for any damages that you may incur from such use.

This article is provided by National Bank, its subsidiaries and group entities for information purposes only, and creates no legal or contractual obligation for National Bank, its subsidiaries and group entities. The details of this service offering and the conditions herein are subject to change.

The hyperlinks in this article may redirect to external websites not administered by National Bank. The Bank cannot be held liable for the content of external websites or any damages caused by their use.

Views expressed in this article are those of the person being interviewed. They do not necessarily reflect the opinions of National Bank or its subsidiaries. For financial or business advice, please consult your National Bank advisor, financial planner or an industry professional (e.g., accountant, tax specialist or lawyer).

Categories

Categories