The Family Home
The “Matrimonial Home” is where you live. It’s given a special status by the Law of this province. You cannot mortgage or sell the house without your spouse’s permission; whether you own it, your spouse owns it or you both own it. You are both entitled to possession of the home and (unless a court orders otherwise) you are entitled to come and go as you please whether you still live there or not. How the court divides up your property on separation often changes when it involves this unique piece of property. To top it off you can have more than one at the same time.
Your Investments
Bank accounts, Savings Bonds, GICs , RRSPs, Mutual Funds or any other monies that are held in your name are your sole property. Unless these monies are in joint names they belong to whoever has their name on the account. That isn’t changed by your separation. There are complex principles of trust law that might change this fundamental fact but those are special cases. In most circumstances, you have no right or entitlement to your spouse’s property nor do they to yours. A court has the power to limit your (or your spouse’s) use and management of the investments and they can be frozen by court order. This is not usually done unless there is a risk that one of you will try to hide or dissipate assets in order to avoid obligations. However, until a court orders otherwise, you are entitled to deal with your property and investments as you believe best.
Your Pension
Currently the “Law” treats your pension like any other asset. It is taken into consideration when calculating what is owed between you and your spouse to “equalize” the value of your property. Your pension however is significantly different from these other assets. Although it has a current “value” (which may be substantial), it is a value you can’t immediately turn into money.
You can’t sell it or cash it in. You have to wait until you retire and even then it is paid out on a monthly basis. However, when calculating what you have to pay to, or receive from your spouse in “equalization of net family property” the full current value of the pension is used. If the pension value equals the value of everything else the two of you own then typically the pension holding spouse keeps the pension and the other spouse would be entitled to all other assets.
When the pension value is high and there are few other assets it is often necessary to agree on some form of pension sharing that will occur when the pension is received. Making sure that any such arrangement is fair to both parties and is binding on the pension provider can be very complex.
This may soon all change. There is legislation that has been passed by the Ontario Government and is waiting proclamation that would provide for all Pensions in Ontario to be divided between separating couples “at source”. Pension providers will be required to calculate and divide the pension benefits between spouses at the time of separation. The value of the pension of either or both spouses would no longer be part of the equalization process. Until this legislation is passed, pensions will continue to often complicate property division on marriage breakdown.
Equalization of Net Family Property
With property, winding up a marriage is very much like winding up a business partnership. With some exceptions the value of whatever property has been gathered and retained by the family over the course of the marriage is shared equally. In family law the definition of “property” is very broad.
It is called “net” family property for a reason. When determining what value of property is to be shared by this equalization payment there are a number of exclusions and deductions. Except for the matrimonial home the value of property you brought into the marriage is deducted from the value of the property you owned on the date of separation. With some exceptions, the value of what you received during the marriage by reason of gift or inheritance is excluded from the calculation. These are but two of a number of examples. Each comes with a complex collection of legal issues that can only be reasonably explored through a direct meeting with your lawyer.
Once who owes the payment and the amount is determined it then becomes an issue of how it is going to be paid. Will this force sale of the matrimonial home? Can the payment be financed through a new mortgage or loan at the bank? How will the cost of carrying this new financing impact the support issues? Can the payment be made by rolling over RRSPs? Can the payment be made over time and if so is there any limit on how long? What happens if the paying spouse goes bankrupt? These are all issues on which sound professional advice and representation is needed.
