How Equalization Payments Are Calculated in Ontario

Equalization is the way Ontario law shares the growth in wealth between married spouses when they separate or divorce. It is not a split of every item you own. It is a comparison of two totals, followed by a payment from one spouse to the other if the totals differ.

Knowing the steps helps you gather the right numbers and spot disputes early. The figures themselves, such as how a business or home is valued, usually need professional help.

The basic idea

On separation or divorce, the spouse whose net family property is smaller is entitled to one-half of the difference between the two spouses' net family properties. In other words, you work out each spouse's total, subtract the smaller from the larger, and the lower spouse is entitled to half of that gap.

The payment is owed by the spouse with the larger net family property. Names on title do not decide it. What counts is what each spouse owns, and owes, on the valuation date.

Step by step

• Find the valuation date, which is the earliest of several dates. One is the date the spouses separate with no reasonable prospect of resuming cohabitation.
• List the value of all property each spouse owns on that date.
• Remove excluded property, such as gifts or inheritances from a third party received after the marriage, personal injury damages, life insurance proceeds and property excluded by a domestic contract.
• Subtract debts and permitted deductions to reach each spouse's net family property, which is never less than zero.
• Compare the two totals and take one-half of the difference.

A gift or inheritance is not excluded if it is a matrimonial home. Whoever claims an exclusion must prove it.

What is counted

For a Pension Benefits Act plan, the imputed value of a spouse's interest is set under that Act. An order may provide for an immediate lump-sum transfer out of the plan. That transfer can be sought only if a court order, family arbitration award or domestic contract provides for it, and it must state a fixed sum or a proportion of the imputed value. A lump sum of more than 50 per cent of the imputed value has no effect to that extent.

When the result may change

A court may award more or less than half the difference if equalizing would be unconscionable. That is an exception, not the usual outcome.

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

Even where a marriage is void or voidable, a person who entered it in good faith can count as a spouse under the Family Law Act, so equalization can still be available. Unmarried partners are treated differently, so ask a lawyer how the rules apply to you.

What to do next

• Fix the likely valuation date and note why you chose it.
• Collect statements for accounts, pensions, RRSPs, loans and credit cards as of that date.
• Keep proof for anything you say is excluded, such as an estate letter or insurance paperwork.
• Get help valuing a business, pension or home where values are disputed.
• Put any agreement in writing, signed and witnessed. Full disclosure matters, because a court may set an agreement aside if significant assets or debts were not disclosed.

A lawyer can check your figures and the deadlines before you settle.

Frequently asked questions