How do joint assets work on Separation?

Joint assets need to be resolved when your relationship ends. How? That depends upon the relationship.

The first thing to know is the type of relationship you were in to know how to deal with joint assets.

Most people would think, “Don’t you just split them equally?” If it were that simple, then the libraries and internet would not be full of articles, books and law on the topic.

We will try to make this as easy as we can.

There are two types of relationships to consider when you deal with joint assets, common law (living together) or married.

Common Law

If you are common law, it’s a simple question of dividing joint assets equally. Most of the time. We will come back to that later.

In the case of a bank account, it’s simple. You each take 1/2 the balance of the account and close the account. Easy.

A jointly owned car, again not that bad. You find out the fair market value, often from a dealer, and decide if one of you wants to keep it. If you do, then you simply buy out the 1/2 value owned by the other person. If the car is worth $20,000, and you keep it, you pay the other person $10,000. If there is a loan on the car, you have to get a bit more work done. For example, there is a $5,000 loan on the $20,000 car, the car is not really a value of $20,000. It is worth the value minus the debt, or $15,000. So, if you want to keep the car, you need to take over the loan in your own name. You need the bank’s approval to do that. Then you pay 1/2 the real value to the person who does not want the car, that being 1/2 of $15,000 or $7,500. Getting the ownership changed is just a trip over to any Service Ontario office. You need to tell them you are changing ownership due to a separation and there should be no cost.

In these cases, the most difficult part can be agreeing with your (former) spouse on the fair market value to begin with. Doing some web-based research can help there.

The easy way to deal with a vehicle that is joint, is to sell it. Split the money equally and you are done. Not everyone wants to do that as often you will not get what you believe the fair value of your car is.

Houses are a different matter. If the joint asset is a house, that tends to be slightly more complicated. Houses tend to be the most valuable joint asset. Unless you own a large corporation together, most often the biggest value is the house. Same two approaches, either one of you buys out the other or it sells. Essentially, you do the same process here as you would with a car. Agree on the fair market value. Often, people will hire a Certified Residential Appraiser to do the value for them. They are the same people the banks hire to appraise your house for financing. The appraisal is different for a Separation, as it’s a fair market appraisal for separation – not a financing appraisal. Then you decide if you want to buy out your former spouse or you sell. Once you have an agreed value and you want to keep the house, then you often have a mortgage or secured line of credit to deal with as well. When you own the house jointly, then you own the mortgage and line of credit jointly too. The person being bought out will want to make sure their name is taken off the mortgage and any secured line of credit. It would be a rather unpleasant shock to find that you have stopped paying the mortgage and they get called by the bank to pay it when they no longer even own a share of the house.

The math then works like this: let’s say the house is worth $350,000 and the mortgage is $250,000. Being a house, it is a bit more complicated as you need to find out if there is a penalty for breaking your mortgage.  You also need to find out what the costs are for getting the ownership changed. Transferring a car is free – transferring a house is not. You will likely want to negotiate with your former spouse about sharing the costs to have them taken off the deed to the house and the mortgage.

This is often where people run into another unexpected challenge; the bank. It would be simple if people could just come up with an agreed value and say that one person will buy out the other. The trick is that a bank will want to make sure there is a Separation Agreement done before anything goes ahead. Another thing to find out what the costing is for. If the only things to get sorted are the joint assets in a common law relationship, then it should not be complicated to get a Separation Agreement done. Often, there are children, which then raises parenting issues and child support issues. There can also be spousal support issues. All of a sudden you have many more things to sort out besides a house.

The simplest way to deal with a jointly owned house is to sell it. That being said, you then have to spruce up your place, both of you have to pack up everything and often bear the cost of a real estate agent. No answers are simple, but at least when you sell, there is no argument over the value of the house.

Now back to the “most of the time” that we said we were going to talk about later. Sometimes even though you own something jointly, one or both partners may have an equitable claim. That’s too complicated for this article. Suffice it to say, you should find out if you are in the simple category or not before you sell a house and split the proceeds.

What if you are Married?

Being married means you now come under the umbrella of the Family Law Act of Ontario and dealing with joint assets is more complicated. Assets, both joint and not joint, now need to be looked at under the equalization scheme of that legislation. For that, see our article “the Other 50/50 myth”. Suffice it to say, you don’t just split it all down the middle equally.