TMZ reported that “Orange is the New Black” star Lauren Lapkus has offered her husband, Chris Alvarado, an $85,000 payment to settle the property division issues in their divorce. The gossip site suggests that Lapkus made this offer to smooth things along in the divorce process.
In Ontario, the property division process for married couples is known as the equalization of net family properties, or simply, equalization. The process is governed by section 5 under Part 1 of the Ontario Family Law Act. It is the value of assets — not the assets themselves — that is divided between the spouses.
The equalization calculation starts with determining each spouses Net Family Property (“NFP”). A spouse’s NFP is calculated by comparing their assets and liabilities on the date of separation with those on their date of marriage. Essentially, the value of a spouse’s date of marriage net worth is subtracted from their separation date net worth. This amount is the spouse’s NFP.
Once each spouse’s NFP is determined, the lower NFP is subtracted from the higher one and the difference is divided in half. This final amount is the “equalization payment” owed by the spouse with the higher NFP to the other spouse. There are some exceptions to this calculation.
If Lapkus was an Ontario citizen offering her husband $85,000 to settle equalization, this could mean that the difference between hers and Alvarado’s NFPs is at least $170,000, though it could be higher.
The underlying idea behind Ontario’s property division regime is that, because marriage is a form of partnership, it is assumed that the spouses contributed equally – financially or otherwise – to the gains of the marriage. As such, this assumed equal contribution entitles both spouses to share equally in the assets and profits accumulated during the course of the marriage.
While the both spouses have the right to claim equalization, the law does not preclude spouses from dividing their property as they wish. Some divorcing couples may prefer to negotiate a settlement outside of court and come to an agreement regarding property division on their own. In these out of court settlements, usually done through separation agreements or marriage contracts, the parties can negotiate a split of the value of property that is not 50/50.
If a divorcing couple go through the court to divide their property, property division will be governed by the equalization process as set out in section 5 of theFamily Law Act.
Though Lapkus and Alvarado have filed court papers, they still can still settle their property issues without the court determining equalization for them. This appears to be what Lapkus is doing.
Is this is a good deal for Alvarado? That’s difficult to say without having a better idea of each spouse’s respective financial situation.
Regardless of whether Lapkus and Alvarado’s property division is finalized through negotiating a settlement or determined by a court, financial disclosure is a necessary first step.
The equalization process (and all family law matters in general) are determined based on full, frank, and honest financial disclosure.
If this matter were in Ontario, the parties would have likely filed and/or exchanged Financial Statements setting out their debts, assets, and liabilities as of the date of marriage and date of separation. They must also provide disclosure regarding income. The parties should have also provided each other with documentation supporting each amount and value as listed on their Financial Statement. All this information is crucial to ensure that any agreement arising from negotiations was made with full knowledge and awareness of the other spouse’s financial circumstances at separation.
When an agreement regarding property division is made without full and frank financial disclosure by one spouse, the other spouse may have grounds to have those provisions set aside by the court at a later date.
As such, if Alvarado were seriously considering accepting Lapkus’ offer, he would greatly benefit from the assistance of a family lawyer to review his wife’s financial disclosure and provide an opinion whether it is a fair settlement in all the circumstances.