- Net family property is what you own on the valuation date less your debts and other liabilities.
- The spouse with the smaller figure is entitled to one-half of the difference between the two.
- Some property, such as inheritances received during the marriage, is excluded, but the matrimonial home is treated differently.
If you are separating in Ontario, you will hear the phrase net family property very quickly. It sounds technical, but the idea is a simple comparison of two spouses' financial positions.
This article walks through the steps, uses an invented example to show how the comparison works, and points out where people commonly go wrong. Your own figures will depend on your facts.
What net family property means
Net family property is the value of the property a spouse owns on the valuation date, after deducting that spouse's debts and other liabilities. Each spouse has a net family property figure, and the two figures are then compared.
The valuation date is the earliest of several dates. The first is the date the spouses separate and there is no reasonable prospect that they will live together again.
The calculation step by step
- List everything you own on the valuation date and its value on that date.
- Subtract your debts and liabilities on that date, such as credit cards, car loans and the remaining mortgage.
- Identify what you owned on your wedding day, which is valued as of the date of marriage. Debts at marriage are subtracted from property owned at marriage, except debts tied to the family home, such as a mortgage. How this wedding-day figure is then used in your own calculation depends on your situation, so it is worth confirming with a lawyer.
- Remove excluded property, described below.
- Compare the two spouses' results. The spouse with the smaller figure is entitled to one-half of the difference.
Here is a made-up example, for illustration only. Say Spouse A's net family property is larger than Spouse B's. The difference between the two figures is worked out, and Spouse B, the spouse with the smaller figure, is entitled to one-half of that difference. Spouse A would owe an equalization payment of that amount. Because the payment depends on the gap between the two figures, a change in how one asset or debt is valued can change the result.
| Step | Spouse A (larger figure) | Spouse B (smaller figure) |
|---|---|---|
| Net family property | The larger of the two | The smaller of the two |
| Difference | The gap between the two figures | The same gap |
| Equalization | Owes one-half of the difference | Entitled to one-half of the difference |
Dates and starting points
People often mix up the two key dates. Property you owned at separation is valued as of the day you separated, while property you owned on the wedding day is valued as of the date of marriage.
Because the valuation date is tied to separation, the date you say you separated can change the numbers. If you and your spouse disagree about when that happened, say so early and keep records, such as when someone moved out or when you told each other the relationship was over.
What is excluded and what is not
Property acquired during the marriage by gift or inheritance from a third person, personal-injury damages, and property the spouses agreed in a domestic contract to exclude are not included in net family property. This exclusion does not apply to a matrimonial home.
For the family home, the full value must be shared even if one spouse owned it before the marriage or received it as a gift or inheritance, unless the spouses agree otherwise. Whether a particular asset fits an exclusion can turn on how it was kept and used, so it is worth confirming with a lawyer.
When the result is not equal, and your deadline
A court may award a spouse more or less than half the difference if equalizing the figures would be unconscionable. One factor it considers is a spouse's intentional or reckless depletion of their net family property. To protect property while a claim is pending, a court may make an interim or final preservation order restraining the depletion of property.
An equalization application cannot be brought after the earliest of two years after the marriage ends by divorce or judgment of nullity, six years after separation with no reasonable prospect of resuming cohabitation, or six months after the first spouse's death. On motion, a court may extend a Family Law Act time limit if there are apparent grounds for relief, the delay was incurred in good faith, and no person will suffer substantial prejudice.
What to do next
- Record the separation date and the wedding date.
- Gather statements showing balances on both dates.
- List debts as carefully as assets.
- Set aside documents about gifts, inheritances or any domestic contract.
- Share complete financial information; a court may set aside a separation agreement if a party failed to disclose significant assets or debts.
- Speak with a lawyer or accountant about valuing pensions, businesses or real estate.
Family Law Information Centres are free services across Ontario that give information about separation and divorce, with duty counsel provided by Legal Aid Ontario.
Frequently asked questions
Who pays the equalization payment?
The spouse with the larger net family property generally pays. The spouse with the smaller one is entitled to one-half of the difference between the two.
Do debts reduce net family property?
Yes. Net family property is calculated after deducting your debts and other liabilities, including credit cards, car loans and the remaining mortgage.
Is the date of separation or the date of divorce used?
The valuation date is the earliest of several dates, and the first is the date of separation with no reasonable prospect of living together again. It is not simply the divorce date.
Does this apply if we lived together but never married?
The equalization rules described here are for married spouses. Common-law couples are not legally required to split property acquired while living together, and items generally belong to whoever bought them. A partner who contributed to the other's property may need to go to court to recover that contribution.
Sources
- Family Law Act, R.S.O. 1990, c. F.3 (e-Laws) — Ontario e-Laws
- Ontario.ca – Dividing property when a marriage or common law relationship ends — ontario.ca
- Ontario.ca – Family Law Information Centres — ontario.ca
Links go to official government, court and regulator pages. The law changes — confirm you are reading the current version.
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