How Equalization Payments Are Paid in Ontario: Lump Sum or Instalments

Once the numbers are worked out, the next question is practical: how and when does the money actually change hands? That question matters whether you expect to pay or to be paid.

This article covers how the amount arises, what a court can order about timing and security, and special rules for pensions, businesses and interest in Ontario.

Where the equalization amount comes from

When a divorce is granted, a marriage is declared a nullity, or spouses separate with no reasonable prospect of resuming cohabitation, the spouse with the lower net family property is entitled to one-half of the difference between the two. A court may award more or less than half only if equalizing would be unconscionable, and Ontario.ca describes this as limited to very special situations where an equal split would be extremely unfair to one spouse.

Net family property is the value of all property a spouse owns on the valuation date, except excluded property, less debts and the net value of property owned on the date of marriage (other than a matrimonial home). If it comes to less than zero, it is deemed to be zero.

The amount owed is one thing. How it is paid is another, and the parties can often agree on it.

Lump sum, instalments and delayed payment

A court may order one spouse to pay the other the equalization amount owed, and may order security for that payment. To avoid hardship, it may allow payment in instalments or delayed payment for up to ten years. It may also order property transferred, partitioned or sold.

• Lump sum: the whole amount is paid at once, often from savings, a sale or a refinance.
• Instalments: set payments over time, which a court may allow to avoid hardship.
• Delayed payment: payment later, again up to the ten-year limit.
• Transfer of property: assets are transferred instead of cash, where an order or agreement provides for it.

If the paying spouse's circumstances change materially, the court may vary instalment or delayed-payment terms. It cannot change the amount owed, and it cannot postpone payment beyond the ten-year period.

Security, preservation and special assets

If you are worried the money will not be there, ask about security. A court may order security for the payment. In an equalization application it can also make interim or final orders restraining the depletion of a spouse's property.

An operating business or farm gets special care. A property order must not require or cause its sale, or seriously impair its operation, unless there is no reasonable alternative. The court may instead order a share of profits or, for an incorporated business, a transfer of shares. Valuing a business needs expert evidence, as no statutory formula exists.

Pensions follow their own route. An order may provide for an immediate lump-sum transfer out of a pension plan, or may divide pension payments if the pension is already in pay on the valuation date. For plans covered by Ontario's Pension Benefits Act, a family law order, award or domestic contract is not effective to the extent it gives the other spouse more than 50 per cent of the imputed value of the pension. Federal and other non-Ontario pension plans follow their own statutes, so how this applies to your plan depends on the plan and is worth confirming with a lawyer.

Interest on the money owed

A person entitled to an order for payment of money can claim prejudgment interest from the date the cause of action arose to the date of the order. Postjudgment interest runs from the date of the order.

Where it is just, the court may disallow interest, allow a higher or lower rate, or allow interest for a different period. Rates change every quarter and are published by the Ministry of the Attorney General, so check the current rate rather than relying on an old figure.

Time limits and what to do next

An equalization application must be brought by the earliest of two years after the marriage ends by divorce or nullity, six years after separation with no reasonable prospect of resuming cohabitation, or six months after the first spouse's death. A court may extend a time limit if there are apparent grounds for relief, the delay was in good faith and no one will suffer substantial prejudice.

• Collect statements for accounts and investments from the valuation date.
• List debts, pensions, business interests and any excluded property you will need to prove.
• Decide what payment structure you could realistically live with.
• Ask about security if payment will be delayed.
• Get legal advice on timing, taxes and your deadlines before you sign anything.

Frequently asked questions