Dividing Property Located Outside Canada in an Ontario Separation

If you or your spouse own a house, a bank account or a business outside Canada, you may wonder whether it counts when you separate in Ontario. Equalization is a payment of money based on the value of what each spouse owns, and the Act defines property broadly. Whether a particular asset abroad is included depends on the facts.

This article explains how the Ontario calculation works and where a foreign asset can raise extra questions. How a particular foreign asset is valued, and how a payment is enforced, depends on the facts and on the other country's rules, so a lawyer and a valuator or accountant are worth consulting.

How equalization works

When spouses separate with no reasonable prospect of resuming cohabitation, the spouse with the lower net family property is entitled to one-half the difference between the two net family properties. This is a payment of money. It is not a split of each asset.

Net family property is the value of all property a spouse owns on the valuation date, minus excluded property, minus debts and other liabilities, and minus the net value of property (other than a matrimonial home) owned on the date of marriage. The Ontario government describes the same steps: add up your property, subtract debts and excluded property, subtract your date-of-marriage net value, then divide the difference between the spouses' totals by two.

Does property abroad count?

The Act defines property as any interest, present or future, vested or contingent, in real or personal property. That is a wide definition of the kinds of interest that can count. A condo overseas, a foreign brokerage account, shares in a family company or a pension earned abroad are the kinds of interests people ask about.

Whether a particular foreign asset is treated as part of net family property, and how a foreign court or registry would treat an Ontario order, depends on the facts and on the law of the other country. That is a good question to raise early with a lawyer.

A home abroad can also raise the matrimonial home question. A matrimonial home is property in which a person has an interest and that is, or was at separation, ordinarily occupied by the spouses as their family residence. A couple can have more than one, and a rental property they did not live in as a family residence does not qualify. This matters because the date-of-marriage deduction is not allowed for a matrimonial home, so its full value is included even if one spouse owned it before the marriage.

How value is worked out

Values are calculated as of close of business on the valuation date or the date of marriage. The valuation date is the earliest of several dates, including separation with no reasonable prospect of resuming cohabitation and the date a divorce is granted.

• Property owned on the date of marriage, other than a matrimonial home, is deducted at its net value then, so only the growth is shared.
• Debts on the valuation date, such as mortgages, loans and lines of credit, reduce the value, including debts tied to the foreign asset.
• A spouse who claims a deduction or an exclusion must prove it.
• Gifts and inheritances received from a third person after the marriage are excluded, except for a matrimonial home.

Currency conversion, foreign appraisals, local taxes and the cost of selling are practical valuation issues. The Ontario rules cited here do not settle them, so they are usually handled with appraisal evidence and professional advice.

Disclosure and agreements

A party making a property claim in court must serve and file a financial statement in Form 13.1. For a Part I Family Law Act property claim, listed documents must be served no later than 30 days after the financial statement is due, including the statement closest to the valuation date for each account at a financial institution. Before a settlement conference or trial, each party must also serve and file a net family property statement (Form 13B).

If you have a marriage contract or separation agreement, it can change the result, because a domestic contract prevails over the Act on matters it covers, unless the Act provides otherwise. A court may set aside a domestic contract if a party failed to disclose significant assets or debts when it was made.

What to do next

• List each foreign asset, who holds title, and in what country.
• Gather statements showing the value on or near the valuation date, and on the date of marriage if you owned it then.
• Collect records of related debts, such as foreign mortgages.
• Note any gift or inheritance history and any marriage contract or separation agreement.
• Mark the deadlines: an equalization application cannot be brought after the earliest of two years after divorce, six years after separation, or six months after the first spouse's death.
• Speak with an Ontario family lawyer, and an accountant or valuator if the asset is a business, about foreign-law questions.

Frequently asked questions