What Debts Count in an Equalization Calculation in Ontario?
Debts and other liabilities that exist on the valuation date reduce your net family property, and examples include lines of credit, loans and mortgages. They are deducted when net family property is calculated, alongside excluded property and the net value of property you owned on the date of marriage.
Debts are measured as of the valuation date, at close of business. If your debts are larger than your assets, your net family property is treated as zero, and the other spouse does not take on any of the shortfall. The person claiming a deduction has to prove it, so it helps to keep statements and records.
Whether a specific debt, such as a credit card balance, a tax debt or a student loan, counts as a liability can depend on the facts, and a lawyer or accountant can confirm. A court can depart from equal sharing only if equalizing would be unconscionable, and the factors include debts incurred recklessly or in bad faith and one spouse carrying a disproportionately larger share of debts for the support of the family.
Key takeaways
- Debts and other liabilities on the valuation date, such as lines of credit, loans and mortgages, are deducted when net family property is calculated.
- If your debts exceed your assets, your net family property is treated as zero, and the other spouse does not take on the shortfall.
- The person claiming a deduction has to prove it, so keep statements and records.
- Whether a particular debt, such as a credit card, tax debt or student loan, counts depends on the facts and is worth confirming with a lawyer or accountant.