What Is Equalization in Ontario Family Law? A Plain Explanation

When you separate, you may hear that you and your spouse need to "equalize". It sounds like everything gets divided down the middle. That is not quite how it works, and the difference matters when you plan your next steps.

This article explains in plain words what equalization is, how the number is reached, who it applies to, and what it does not do. It is general information about Ontario law, not advice on your own situation.

What equalization means

Under Ontario's Family Law Act, 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 the difference between the two net family properties.

Equalization is a payment of money. It is not a split of each asset. You do not automatically get half of the house, half of each account or half of the car. Instead, the totals are compared and one spouse pays the other the balance.

The idea behind it is that child care, household management and financial provision are joint responsibilities, and that each spouse contributes equally to them, whether financially or otherwise.

How the number is worked out

Each spouse first works out their own net family property. That is the value of everything the spouse owns on the valuation date, minus excluded property, minus the spouse's debts and other liabilities, and minus the net value of property (other than a matrimonial home) the spouse owned on the date of marriage.

The Ontario government describes the steps this way:

• Add up your property at separation.
• Subtract your debts and excluded property.
• Subtract your net property value on the date of marriage.
• Divide the difference between the two spouses' totals by two.
• The spouse with the larger total pays the equalization payment.

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

What counts, and what is left out

"Property" is defined broadly. It means any interest, present or future, vested or contingent, in real or personal property, which can capture assets such as unvested stock options, investments and crypto-assets. How some of these assets are valued can vary from case to case, so a lawyer or accountant can help.

Some property is excluded. Debts reduce your total. The main exclusions and rules are:

• Property, other than a matrimonial home, that you received by gift or inheritance from a third person after the date of marriage.
• Income from gifted or inherited property, but only if the donor or testator expressly said it is excluded.
• Damages for personal injuries, life insurance proceeds payable on death, property excluded by a domestic contract, and certain other items.
• Property you owned on the date of marriage is deducted, so generally only growth during the marriage is shared, but this deduction is not allowed for a property that is a matrimonial home on the valuation date.

If you claim a deduction or an exclusion, you have to prove it.

Who it applies to and what it does not do

Equalization applies to spouses who are married. Common-law couples are not legally required to split property acquired while living together; property generally belongs to whoever bought it, and there is no equalization for unmarried partners. The wider definition of "spouse" used for support does not give common-law partners equalization.

Equalization does not decide who stays in the home. Matrimonial home rights are separate. It also does not override a valid domestic contract, such as a marriage contract or separation agreement, which prevails over the Act on matters it covers unless the Act provides otherwise.

In unusual cases a court may award more or less than half the difference, but only if equalizing would be unconscionable. The Ontario government describes this as available only in very special situations.

What to do next

Time limits apply. An equalization application cannot be brought after the earliest of two years after a 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. A court may extend a time limit only in limited circumstances.

• Write down your date of separation and your date of marriage.
• List what you each own and owe, and what you owned on the date of marriage.
• Gather statements for accounts, loans, pensions and investments.
• Note any gifts, inheritances or a domestic contract.
• Get legal advice before signing any agreement.

If you go to court with a property claim, you must serve and file a financial statement in Form 13.1. A lawyer can explain which documents you will need.

Frequently asked questions