Divorce is an expensive and emotionally taxing endeavour. When people refer to the costs associated with divorce, they aren’t simply referring to the initial cost of family court. In addition to court and lawyer fees, you and your spouse need to divide assets, settle debts, and learn to live on one income. This can be a difficult time, both emotionally and financially, especially if you are dealing with an ex who doesn’t want to negotiate.
According to Canadian Law, “The value of any kind of property that was acquired by a spouse during the marriage and still exists at separation, must be divided equally between spouses.” During the divorce process, there are certain property values that will be included and excluded in the calculation of equal payments that one spouse will pay the other.
What Do I Need For A Divorce?
In Ontario, there are two types of divorce, which can be applied for directly online to the Ontario Superior Court of Justice. This includes:
- Joint divorce: This is a joint decision between you and your spouse, meaning you have both agreed to a divorce and have worked out the details of parenting, spousal support and property division.
- Simple divorce: A simple divorce is filed by one spouse, often because the other spouse does not agree to divorce, and you’re not requesting any other court orders.
Before filing for divorce, there are some criteria you and your spouse need to meet:
- In order to file online, you and your spouse must have lived in Ontario for at least a period of one year prior to filing your divorce application.
- You and your spouse need to have been separated for at least one year.
- You and your spouse must not require a fee waiver.
- You and your spouse must have been married within Canada, or, present an electronically issued marriage certificate from the country your marriage took place. This applies only when filing for a joint divorce and a scanned copy of a marriage certificate will not suffice.
How Much Does A Divorce Cost?
Divorce isn’t exactly something you can budget for, especially if it takes you off-guard. However, there are ways to reduce the overall financial burden of divorce. Here are some figures, according to Canadian Lawyer Magazine and National Bank of Canada:
- An amicable divorce is often the cheapest option for divorce. Lawyer’s fees for this type of divorce in Ontario sit around $1217, and across Canada, the average is $1845
- Court fees in Ontario average $447
- A contested divorce, when spouses cannot agree, averages in price from $13,638 across Canada or $8,747
- Family law legal proceedings that become complex and drawn-out cost between $18706 for 1-2 days or up to $35,950 for 5 days
To avoid serious financial burdens during divorce proceedings, the best thing you and your spouse can do is collaborate. By working out and agreeing on as many terms as possible, you’ll avoid the time and money spent negotiating these terms through a lawyer or in court. This means you and your ex should work together to determine the division of shared property, debts, child custody, support payments and division of investments outside of a lawyer’s office.
During your divorce proceedings, it’s important for you and your spouse to stay focused on the future. You will each have a lawyer who will assist you with the final settlements and terms so you can both achieve the best outcome of an unfortunate situation.
How Are Assets Divided In A Divorce?
One of the most difficult aspects of divorce is deciding how you and your spouse will fairly divide property and other assets. A legal professional who can act as a neutral third party can help make this easier during an emotionally stressful time.
Upon separation, one spouse typically chooses to stay in the matrimonial home while the other moves out. The next decision that must be made is who will be responsible for paying the ongoing home expenses such as mortgage payments, utilities and maintenance. None of these decisions are specifically addressed by Ontario law. However, some legal precedents may apply, such as the non-occupational rent law.
Occupational rent is money paid by the home’s primary resident, to a non-resident. This is meant to act as compensation to the non-resident for occupying their share of the home. This can counteract the financial burden of living and maintaining the matrimonial home, especially during long, drawn-out divorce cases. Occupational rent is only one option. Often, the family home is sold and the money from the sale is divided so that each party can use that money toward a new living space.
From a legal standpoint, and according to the FCAC, “the value of any assets acquired during the marriage and the increase in value of property you brought into the marriage (with some exceptions) are divided equally, unless you and your spouse agree to a different split or the court divides it differently.”
Vehicles that were purchased during the course of your marriage will also factor into your divorce settlement. However, vehicle ownership may not be split equally between spouses. The value of your total assets is the most important factor. Individual ownership of items and assets will depend mostly on who owns them. Joint-owned items should be discussed and divided between you and your ex, rather than involving a lawyer and court ruling.
What Assets Are Included In Your Equalization Of Assets During A Divorce?
All assets owned on the date of separation are part of the equalization calculation of your assets when you divorce. Here’s what you need to know:
- If you’ve inherited money or property during your marriage, it will need to be assessed during the divorce proceedings, unless it has been kept separate and then it is not shared.
- The value of your home and any secondary properties such as cottages, trailers or time-shares will be part of the equalization process.
- Liabilities such as debts, both separate and joint, will part of the calculations.
- Pensions need to be valued as of the date of marriage and date of separation.
- RRSP’s, investments and other retirement funds are subject to division between you and your spouse.
The value of assets is the fair market value of them on the date of separation. For example, the fair market value is what you would receive if you sold the asset on the open market.
You do not “share” your assets or “divide” your assets. You keep your assets and your spouse keeps their assets. You just include the value of each asset on the date of separation.
If you had any assets on the date of marriage, you get to deduct their value for the equalization calculation.
How Is A Pension Equalized In A Divorce?
When it comes to pensions, it is part of the equalization process. A pension plan administrator will first need to value the pension. The value of the pension is used in the calculation of assets and used to equalize your property during separation or divorce. As part of the equalization process, you can transfer up to half of the value of your pension to your spouse. Canada Pension Plans (CPP), however, are divided separately.
How Is Property Equalized In A Divorce?
Basically, in a divorce, the increase in the value of your net worth acquired during your marriage is equalized. There is a formula to calculate it.
Here is how it works:
- You first determine each person’s Net Family Property (NFP)
- Here is the formula to determine your NFP
- Add up the fair market value of your assets on the date of separation
- Subtract your debts on date of separation
- Subtract the value of your assets less debt on the date of marriage
- Subtract the value of any inheritance, proceeds of a personal injury claim, or gifts, received during the marriage and kept separate, as of the date of separation
- If one spouse’s NFP is higher than the other’s NFP, the one with more must pay half the difference to the other to equalize your assets.
For example, John’s NFP is $250,000.00 and Jane’s NFP is $230,000. So the difference is $20,000. As a result, John owes Jane half the difference, being $10,000. Once John has paid Jane $10,000, they will each have an NFP of $240,000.
If you own any jointly owned assets, then either one of you can buy the other’s interest in it or it can be sold.
How Is Property Equalized Or Divided In A Common-Law Relationship?
It is widely assumed that ‘common law’ status is synonymous with the same rights to property and assets as a married couple when the union ends. This is simply untrue. Property division rules, including the value of the matrimonial home, do not apply to common-law couples. For instance, any property owned by either partner plus its increase in value over time continues to belong to the person who purchased it. In the event of separation, there are no automatic rights or claim to its value from the other partner.
Common-law partners may be able to appeal for compensation based on contributions, maintenance or preservation of property, even if their name is not on the title. In this case, there are 3 different claims that can be made to the courts to state your point:
- Resulting trust
- Constructive trust
- Unjust enrichment
Basically, the issue is whether your spouse benefited at your expense. Depending on the outcome, you may be awarded a portion of the property based on the value of your contribution. Separation is much more complicated when you are in a common-law relationship because there isn’t a simple formula you can use.
Who Gets The House In A Divorce?
Keeping the house and being able to afford the house are two separate issues. Retaining the home on your own means keeping on top of the mortgage payments, upkeep, and home insurance. Once the value of the home is divided in a divorce, the home will need to be refinanced. At this point, depending on your financial standing and income, you may not qualify to hold a mortgage on your own.
Sometimes, one person decides to live in the home temporarily, which can add a layer of financial risk. As the Washington Post points out, “Nobody knows what the housing market will be when the house sells.” Hanging onto a home with the hope its value will increase can be risky. If you and your spouse decide to sell the home and divide its value and contents, you may require the help of an expert who can help determine the value of assets such as a home-business, heirlooms or antiques.
How Does Refinancing A Mortgage Work?
If you have the means to continue living in your home, there’s nothing that says you need to sell it in order to divide the value of the home with your ex. Instead, you can choose to refinance and carry the mortgage solo. Refinancing gives you the chance to buy-out your spouse’s equity, giving you more flexibility and hopefully, a better interest rate. To refinance, you’ll need to have an appraisal done to assess the home’s current market value. Your lender will then determine whether you qualify to carry the mortgage alone. In addition to your financial statements, you’ll be required to provide information, including:
- A separation agreement
- Child support payment amounts
- Spousal support payment amounts (if applicable)
Once it’s been determined that you qualify for the mortgage, your partner will need to be removed from the home’s title and released from the mortgage contract.
Divorce And Property Division Lawyers
When you’re considering separation or divorce, your best bet is to speak to a lawyer first. Although loved ones may want to offer well-meaning advice, it’s no substitute for a professional opinion, even if they have been through a divorce themselves. The information they provide may be inapplicable or simply incorrect. This can end up costing you more money and heartache. For this reason, we strongly advise everyone who is considering a divorce or separation to contact us. Divorce lawyers deal with a wide variety of complex issues couples face each day and are skilled in finding efficient resolutions that benefit both parties.
Dealing with a divorce is difficult. A reliable lawyer can be an invaluable resource as you navigate this new phase of your life. At Galbraith Family Law, we have helped countless people and families through the process of property division, division of assets, and mediation.
Galbraith Family Law has been acknowledged as the top family law firm in Barrie multiple times and our legal insights have been featured in accredited papers such as The Globe and Mail and Lawyers Weekly. We would be honoured to represent you. Call us today so we can answer your divorce questions and help you navigate the process.