The Family Law Act (FLA) provides for the equal division of the value of all assets acquired during the marriage (referred to as “net family property”). Under section 7(1) of the FLA, either spouse can, upon divorce or separation, apply for a determination of the spouses’ entitlement under the equalization of net family property. For more information on the rationale behind equalization, see our article: The Equalization of Net Family Property.
In making such an application, each spouse must identify all property that is to be included and excluded in calculating net family property.
Section 8(1) specifies that each spouse must file in court, and serve upon the other, a sworn statement detailing:
The party’s property and debts and other liabilities:
- As of the date of the marriage;
- As of the valuation date (see below); and
- As of the date of the statement;
- The deductions that the party claims under the definition of “net family property” (i.e., debts and liabilities as of the valuation date, and the value of all property owned at the date of marriage);
- Any property the party claims should be excluded from the calculation of net family property, as per s. 4(2) of the FLA; and
- All property that the party disposed of during the two years immediately preceding the making of the statement, or during the marriage, whichever period is shorter.
Determining the Valuation Date
FLA s. 4(1) defines “valuation date” as the earliest of the following dates:
- The date the spouses separate and there is no reasonable prospect that they will resume cohabitation.
- The date a divorce is granted.
- The date the marriage is declared a nullity.
- The date one of the spouses commences an application based on s. 5 (3) (improvident depletion) that is subsequently granted.
- The date before the date on which one of the spouses dies, leaving the other spouse surviving.
The date which is most commonly used is the first, the date of separation. If the value of some assets (such as shares or real estate) has fluctuated dramatically around the date of separation, the valuation date can become a contentious issue between the spouses.
The date of separation will be the time when the spouses began living separately and there is no reasonable prospect they will reunite. Furthermore, if the parties reunite for a brief period during separation, that brief reunion will generally not “move back” the date of separation for the purposes of s. 4(1).
If you and your spouse do not agree on the date of separation, and you are seeking to prove one specific date of separation, an Ontario family law lawyer will be your best resource. At Feldstein Family Law Group P.C., our experienced family lawyers are well versed in the criteria a court will consider in deciding when a couple is living separate and apart, and can help you best present your case that separation occurred at one specific time rather than another.
What Is Included in the Definition of “Property”?
The definition of “property” for the purposes of the calculation is very broad.
Section 4(1) of the FLA states that property includes both vested and contingent interests, and both present and future interests. It includes:
- Property over which a spouse has, alone or in conjunction with another person, a power of appointment exercisable in favor of himself or herself;
- Property disposed of by a spouse but over which the spouse has, alone or in conjunction with another person, a power to revoke the disposition or a power to consume or dispose of the property; and
- In the case of a spouse’s rights under a pension plan that have vested, the spouse’s interest in the plan including contributions made by other persons.
An interest in a business is considered property, though a professional license or degree is not.
It is important that you provide a full and accurate disclosure of your assets to the other party. If you have questions about what constitutes property, and what must be included in your list of assets, it is best to consult a lawyer. The other party, and the court, will not take kindly to any delays and additional costs necessitated by a failure to disclose all assets upfront.
Valuation Date Excluded Assets
Not all assets that each spouse acquires during the course of the marriage are considered to be part of the net family property.
Section 4(2) of the FLA specifies that the following assets are excluded from the calculation of each spouse’s property owned at valuation date:
- Property, other than a matrimonial home, that was acquired by gift or inheritance from a third person after the date of the marriage. This includes gifts that the spouse received from the other spouse.
- Income from that property only if the donor or testator expressly stated that it is to be excluded from the spouse’s net family property. If the donor did not expressly state this, all income from the gift is to be included. “Income” would include, for example, dividends on shares, interest on savings, or rental income.
- Damages from a lawsuit arising from pain and suffering, or the portion of a settlement that represents those damages.
- Proceeds or a right to proceeds of a life insurance policy, as defined under the Insurance Act, that are payable on the death of the life insured.
- Property, other than a matrimonial home, into which property referred to in paragraphs 1 to 4 can be traced. This means that if you used inheritance money to buy stock, that stock is still excluded. Or if you sold jewellery that was given to you, and used that money to buy a car, the car, or that portion of the car that was purchased with the money from the jewelry, is excluded.
- Property that the spouses have agreed in a domestic contract is not to be included in the spouse’s net family property.
- Unadjusted pensionable earnings under the Canada Pension Plan.
Note that all of these assets are excluded only from the valuation day assets. If any of these types of assets, such as a gift or inheritance, were acquired before the date of marriage and therefore brought into the marriage, they are to be included in that party’s date of marriage assets, and they cannot be excluded as they have been characterized as a date of marriage deductions. See our article: Equalization and How it Is Calculated for more information on excluded assets and pre-marriage deductions.
For a free initial in-office consultation with one of our legal professionals, call Feldstein Family Law Group P.C. at (905) 581-7222.