Understanding Equalization in Ontario: How Assets Are Divided in Divorce

Divorce can be an emotionally and financially complex process, especially when it comes to dividing assets. In Ontario, property division follows an equalization process, ensuring that both spouses receive a fair share of the marital assets. Understanding how this process works and the factors that influence it can help you navigate your divorce with greater clarity and confidence.

What Is Equalization of Net Family Property?

In Ontario, spouses do not automatically split assets 50/50. Instead, the equalization process ensures that both parties leave the marriage with an equitable share of the wealth accumulated during the marriage. This means that rather than dividing each asset in half, the spouse with the higher Net Family Property (NFP) must pay the other spouse an equalization payment.

Calculating Net Family Property

Each spouse’s Net Family Property is determined using the following formula:

1. Total Assets on the Date of Separation – This includes real estate, savings, investments, pensions, business interests, and other financial assets.
2. Minus Debts on the Date of Separation – Mortgages, loans, credit card balances, and any other outstanding liabilities are deducted.
3. Minus the Value of Assets Owned on the Date of Marriage – Assets brought into the marriage are excluded, except for the matrimonial home (which is treated differently).

Once each spouse’s NFP is calculated, the person with the higher amount must pay the other spouse half of the difference to achieve a fair distribution.

Key Factors That Affect the Equalization Process

1. The Matrimonial Home

Unlike other assets, the matrimonial home (the primary residence where the couple lived during the marriage) is treated differently. Even if one spouse owned the home before the marriage, its entire value is included in the equalization calculation, and the spouse cannot deduct its pre-marriage value.

2. Excluded Property

Certain assets are excluded from the equalization calculation, including:

• Inheritances or gifts received during the marriage (unless used for joint benefit, such as purchasing a matrimonial home).
• Proceeds from a personal injury settlement.
• Life insurance proceeds.

3. Debts and Liabilities

Any debts accumulated during the marriage are also considered when calculating Net Family Property. If one spouse incurred significant debt, it could reduce the total equalization payment owed.

4. Marriage Contracts and Prenuptial Agreements

If a couple signed a marriage contract (prenuptial or postnuptial agreement), it may outline specific terms for property division. Courts will generally enforce these agreements unless they are found to be unfair or improperly executed.

Protecting Your Rights During Equalization

Dividing assets in a divorce can be complicated, and misunderstandings about the equalization process may lead to disputes. Seeking legal guidance ensures that your rights are protected and that you receive a fair share of the marital assets.

Need help navigating your property division? Contact me at (416) 782-7999 or marcy@marcysegallaw.com to discuss your case.