Reckless Spending and Dissipated Assets in Equalization Ontario

You look at the bank statements after separation and the savings are gone. Maybe your spouse spent heavily on things you never agreed to, or moved money around in a way you cannot explain. The question is whether you are stuck with the result or whether the waste can be taken into account.

This article explains how property division works in Ontario, why spending before separation can create a problem, and how high the bar is for asking a court to depart from an equal division. How the law treats a particular pattern of spending depends on the facts, so use this as a map, not a prediction.

What people mean by dissipated assets

Dissipation is a plain-language label for property that was wasted, given away or used up in a way that hurt the family's finances. It is different from ordinary spending on a lifestyle both spouses shared. Paying for groceries, a vacation you both took or a car you both used is rarely what people mean.

The more serious complaint is that one spouse used family money for something that did not benefit the family, at a time when the marriage was ending or in a way the other spouse never accepted. Whether a given expense fits that description is a question of fact, and spouses often disagree about the story.

How equalization works first

To see why spending matters, start with the basic calculation. A spouse's net family property is the value of all property that spouse owns on the valuation date, except property excluded under s. 4(2) of the Family Law Act, less debts and liabilities.

Once each spouse's net family property is worked out, the spouse with the lesser amount is entitled to one-half of the difference between the two. This is the default rule.

The calculation looks at what exists on the valuation date. That is why wasted money is a concern: money that was spent before then is not there to be counted, so the spouse who spent it may end up with a lower figure, and the other spouse may receive a smaller equalization payment than expected.

When can the equal share be changed?

The Act allows a court to vary the equal share only if equalizing the net family properties would be unconscionable. The threshold is high, and mere unfairness is not enough.

The Court of Appeal for Ontario has also said that courts need not apply a time-weighted formula. In one short-cohabitation case, the court upheld a payment of 10%. That outcome was tied to its own facts and is not a rule or a formula you can apply to your case.

Whether a particular pattern of spending, including reckless spending, could meet that high threshold, and how a court would weigh it, depends on your situation, so it is worth confirming with a family lawyer.

What proof matters

A court looks for evidence that shows what happened to the money, when it happened and why. The records below are the kind of material that can help show that.

• Bank, credit card, line of credit and investment statements covering several years before separation
• A timeline showing when balances fell and when large withdrawals or transfers took place
• Records of what the money bought, or proof that it bought nothing of value to the family
• Messages or emails that show what the spouses agreed or discussed about the spending
• Statements showing what each account held on the date of marriage and on the valuation date
• Any marriage contract or separation agreement that deals with property

Be careful about your own side of the ledger as well. If you also spent heavily, or approved the spending, expect that to come up. Honest records help you more than a one-sided account.

Contracts and shared property can change the picture

If you signed a marriage contract or other domestic contract, check what it says about property. Property the spouses agreed in a domestic contract is not to be included is excluded from net family property. A contract can therefore reshape the whole calculation.

If you think a contract is unfair, setting it aside is a two-step process. You must first show that one of the statutory circumstances applies, for example that a party did not understand the nature or consequences of the contract. That is necessary but not enough. The court then decides whether to exercise its discretion to set aside the contract or a provision, and fairness is an appropriate consideration.

What to do next

Act early, while records are easy to get and your memory is fresh. A calm, documented approach is more persuasive than an angry one. If you are unsure what you may or may not do with accounts or messages, a family lawyer can confirm that for your situation.

• Identify your date of marriage and your likely date of separation, and write down why you chose them
• Download statements for every account, including ones in your spouse's name that you can see
• Mark the transactions that worry you and note what you know about each
• Ask a family lawyer whether the spending is the kind that can affect your claim, and what deadlines apply to you
• Ask a family lawyer how you can get a full picture of your spouse's finances, since what you can request depends on your situation

Frequently asked questions