Archive for the ‘Property Division’ Category

Can I lose my family home or cottage to my spouse?

December 9th, 2011

When a family home or cottage is been in a family for generations, the spouse who is inheriting the property may be worried that the property will be lost to a spouse in divorce. If the spouses used that traditional family home together as a matrimonial home, a court can order that the “non-inheriting spouse” can stay in that home until the parties divorce, which may take several years. The court cannot order that the “non-inheriting spouse” gets legal title to the property. However, the family property regime in Ontario can force a spouse who has had a home in the family for generations to transfer it to the other spouse out of financial necessity.

The difficulty surrounding traditional family homes is mostly caused by the requirements in Ontario’s Family Law Act that any matrimonial home be included at full value in a spouse’s net family property. A matrimonial home can be any home that the spouses used or occupied together during the marriage. There can be more than one matrimonial home. Both a home and a cottage can be a matrimonial home at the same time. If one spouse inherits the traditional family home prior to separation, the value of that property on the date of separation is shared between the spouses. If the other spouse has significant assets, the value of which must also be shared, then this may not have much impact on the traditional family home. However, if the “non-inheriting spouse” does not have many assets, then the equalization of the party’s net family properties can require in the inheriting spouse making a very large payment to the other spouse. That payment may be half the value of the inherited property. Inheriting spouses may have no option but to either sell the traditional family home or transfer it to the other spouse to satisfy this obligation.

The breakdown of a marriage after only a short time can result in circumstances that are quite unfair. If a spouse inherits the traditional family home prior to the marriage, the whole value of that property may be shared on marriage breakdown. A spouse does not get credit for bringing a property into the marriage if that property was a matrimonial home on separation. Even after a very short marriage, the entire value of that matrimonial home must be shared, which may result in a situation where the inheriting spouse has to either sell the property or transfer it to the other spouse.

There are two ways to prevent the above circumstances that can result in the loss of a traditional family home. The first is for the spouse not to inherit a property prior to a separation. If a spouse does not own a property, it is not included in that spouse’s net family property and so the value is not shared. The second, and perhaps more practical option, is for the parties to sign a marriage contract that excludes the traditional family home from the calculation of net family property. A marriage contract cannot require that the non-inheriting spouse leave the traditional family home on marriage breakdown or prevent a court from allowing the non-inheriting spouse to stay in the property until the divorce is finalized. However, the marriage contract can ensure that at the end of the whole process, a traditional family home can still be owned by a member of the family.

How is property divided after a marriage in Ontario?

December 1st, 2011

In Ontario, married couples share in the wealth accumulated during the marriage. Common-law couples usually do not. This does not mean that married couples own all their assets jointly or have any other form of interest in each other’s property. Married spouses are entitled to a payment that “equalizes” the growth in the spouses wealth during the marriage.

At the end of a marriage, married spouses in Ontario are entitled to a payment that makes each spouse’s growth in net worth during the marriage the same. There are some exceptions which will be briefly discussed below. This is a right to receive a payment, similar to the right to receive a payment under a contract. This right does not give either spouse any form of ownership interest in the other’s property. At its simplest, the parties add up the value of all their assets on the date of separation, and deduct the value of all of their debts. From that figure, each spouse also deducts his or her net worth on the date of marriage (net worth being total assets minus totals debts and other liabilities.) That calculation results is a number called a spouse’s “net family property.” The spouse with the larger net family property has to make a payment to the other spouse to makes the two net family properties equal.

There are some important adjustments to the calculation of each spouse’s net family property. First, gifts and inheritances from third parties during the marriage are not included in a spouse’s net family property unless a gift or inheritance has been co-mingled with the other spouse. Second, spouses can exclude the value of specific assets from the net family property calculation by using a marriage contract. Third, the whole value of all matrimonial homes owned on the date of separation are included in the spouse’s net family property. A spouse does not get to deduct the value of a matrimonial home owned on the date of marriage if that property is still a matrimonial home on the date of separation. Fourth, the payment of a personal injury claim for pain and suffering is not included in the net family property calculation. However, the portion of a payment for personal injury relating to loss of future income may be included in net family property. Also, while spouses share any increases in their net worth during the marriage, they do not share in any decline in net worth during the marriage.
Judges cannot order that property change hands to equalize the spouse’s net family property. They can only order a payment of money. Such an order for payment is enforced in the same way as any other order for payment of money and can be significantly affected by a bankruptcy by one or both spouses. Spouses can agree to transfer property to each other in fulfillment of family law claims. That can be a significant incentive to settle matters outside of court.

The property claims arising from the breakdown of a marriage can be worth a lot of money. There are nuances to the law that can affect the size of the payment that is made. Family lawyers can ensure that a spouse’s rights are protected. If the spouses are resolving financial issues at mediation, it is important that they choose a mediator who understands the law well in order to obtain a fair result.