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Equalization Payments & the Matrimonial Home

Upon separation, spouses may receive a special "equalization payment", based upon an equal division of their wealth acquired during the marriage.  When calculating the division of property, such items as inheritances, life insurance proceeds and some other items received during the marriage are excluded. 

In very general terms, the payment owed from one spouse to the other is calculated as follows:

• The net value of your property at the date of separation, less the net value of your property at the date of marriage, becomes your 'net family property'.
• The spouse with the higher 'net family property' pays the other spouse one-half the difference between the two. This amount is called an "equalization payment".
• The value of the home, if owned at the time of marriage and separation, does not affect this equalization payment.

The details of the above calculations are somewhat complex; essentially, the value of your property at the date of separation is compared with that of your spouse. 'Property' for these purposes consists of RRSP's, pensions, shareholdings, and other items of value. Deducted from your and your spouses property value are all debts, including contingent liabilities (such as the cost of disposing of assets) and any tax liabilities.Similarly, the value of all property owned on the date of marriage, after deducting liabilities (other than a matrimonial home owned on that date) is deducted from your and your spouses subtotal.  The final balance becomes "net family property."The spouse with the higher net family property pays the spouse with the lower net family property one-half of the difference.  Note that the matrimonial home is neither incuded in the 'excluded property' list, nor is it deducted from net family property if it was owned at the date of marriage. A number of exceptions to the above rules exist and relate to the types of property that may be excluded or must be included in the above calculations.  Consulting a lawyer experienced in family law is critical, to ensure that your rights are protected in any division of property.