We're married. How do we divide our property and debts if we separate or divorce?

Not all assets are treated the same way when you calculate your net family property (NFP). Here are some examples of the most common assets that have special rules.

Matrimonial home

Your matrimonial home is the home where you and your married partner lived together before you separated. A matrimonial home can be a house, townhouse, apartment, or co-op unit.

You can also have more than one matrimonial home. For example, you may have an apartment and a cottage.

A matrimonial home can be owned or rented. But you don't have to list a rental home on your list of assets if you don't have some sort of ownership interest in it.

If you or your partner owned your matrimonial home on the day you were married, there is a special rule that applies.

In this case, you include the value of your home on the date of separation. You also include any debt related to the home, like a mortgage, on the date of separation. But you do not subtract the value on the date of marriage or consider the debt related to the home on the date of marriage like you would for other asset or debt. This means that the total value of the home on the date of separation is shared in the equalization calculation, not just its change in value during the marriage.

For example, let's say the matrimonial home is only in your name and it was worth $175,000 on the date you married and $200,000 when you separated. You have to share the full value of $200,000 with your partner.

Now (Separation Date) = $200,000 value of your matrimonial home

Then (Marriage Date) = $175,000 value of your matrimonial home

Now value (no credit for Then) = $200,000

You have to share the full value of the home now, with no credit for the value on the day you got married = $200,000

To show you how this is different from other assets, compare this to a bank account. Say you had a bank account in only your name that was worth the same amount, $175,000 on the date you married and $200,000 when you separated. In this case, you only have to share the $25,000 change of value.

Now (Separation Date) = $200,000 in your bank account

Then (Marriage Date) = $175,000 in your bank account

Now – Then = $25,000

The increase in value that you have to share is $25,000

There are different rules that apply to a home on a First Nation reserve.

Gifts and inheritances

Your NFP does not usually include any gift or inheritance you receive during your marriage from someone other than your partner, as long as you still have the gift or inheritance at the end of the relationship. These items are sometimes called "excluded" property.

This applies even if you used a gift or inheritance to buy something for yourself. For example, if you can prove that the $5,000 you inherited was used to buy your car, the value of your car is not included in your NFP calculation.

But, if the gift or inheritance was used to buy assets for your partner, to buy assets for both you and your partner, or if it was put into a joint bank account, it can be harder for you to prove that the whole gift or inheritance shouldn't be included in your NFP.

If the gift or inheritance was used to buy or help pay for your matrimonial home, it is included in your NFP.

And if you spent the gift or inheritance and can't show where the money went, you can't ask for the property to be excluded from your NFP.

Other property

Other property that is also "excluded" from your NFP includes:

• money that you got or have a right to get as a result of a personal injury, like a car accident
• money that you received from a life insurance company because someone died

Pension credits

The Canada Pension Plan (CPP) is a type of pension that most workers and employers contribute to. You earn CPP credits as you work. When you retire or can’t work because of a disability, you can apply to get pension payments.

CPP credits you earned during your marriage are also "excluded" property that is not part of the NFP calculation.

Instead, you or your partner can apply directly to Service Canada to divide CPP contributions that were made during the time both of you lived together. You must have lived with your partner for at least one year to qualify. This is why CPP credits aren't included in NFP and the equalization payment.

There are also special rules about how to value and divide other types of pensions. For example, your employer might have a pension plan that you contribute to.

Use financial statement forms

Form 13.1: Financial Statement (Property and Support Claims) can help you with any special rules that apply in your case. For example, in the form:

• "Part 6: Property, debts and other liabilities on date of marriage" explains that you should not include the value of a matrimonial home on the date of marriage.
• "Part 7: Excluded property" explains that you should list all excluded property such as gifts or inheritances.
• "Part 9: Calculation of net family property" explains how to subtract the total value of any excluded property listed in Part 7.

The married partner with the higher net family property (NFP) owes the other partner half of the difference between the NFPs. This is the equalization payment.

Example

Married partner A's NFP = $80,000

Married partner B's NFP = $30,000

Married partner A's NFP - Married partner B's NFP = $50,000

$50,000 divided in half = $25,000

Equalization Payment: Married partner A pays $25,000 to Married partner B

You can use Form 13B: Net Family Property Statement to compare your NFP and your partner's NFP. This makes it easier to calculate the equalization payment. Form 13B uses the information from your Form 13.1: Financial Statement (Property and Support Claims).

Dividing property unequally

Sometimes married partners divide property unequally. This is called an "unequal division of net family property".

Courts rarely make an order to divide property unequally. You have to show the judge why an equal division of net family properties is "unconscionable". This means that dividing property equally is more than just unfair, it must "shock the conscience of the court". This is difficult to prove in court.

Here are some examples of when this might happen:

• One partner doesn't tell the other partner about debts they had on the date of marriage.
• One partner has debts that were incurred recklessly or in bad faith. For example, this may be debts from secret gambling.
• The amount of the equalization payment is large and the marriage lasted for less than five years.
• Both partners agreed on how to divide property but didn't sign a domestic contract. For example, both partners exchanged emails that showed how they agreed to divide property but never officially signed an agreement.