I am divorcing, do I have to split all my property with my spouse?

When you divorce in Ontario, you split some of the assets gained during marriage. There are deductions and exclusions to consider.

Assets Gained During Marriage

You need to identify all assets you had on the date of your marriage, and then do the same math for your husband or wife’s assets for the same date. This is the starting point to determine what you gained during the time of the marriage. You need to do the math to say what assets you started the marriage with. This includes the car you had, even though you may have long since sold it or traded it in. You need to turn your mind back and reflect what that car was worth then (not now).

Deductions

You deduct the value of the assets you owned on the date of marriage from the value of the assets on the date of separation. This determines the value of assets gained during marriage.

You cannot deduct the value of a home you owned at marriage if you are still living in the home when you separate. This is called the matrimonial home and it has its own set of rules. Although you had equity in the home at marriage, unless you have moved out of that home before separation, you must split the full value of the house. If you moved from your first home since marriage, you are entitled to deduct the value on the date of marriage before splitting assets.

For instance, if you had an RRSP when you got married, you are entitled to deduct the value as of the day you got married, since that was your money prior to marriage. However, the value the RRSP increased during marriage must be split.  For example, if you had $20,000 on the date of marriage, and $80,000 on the date of separation, then you get to keep the amount you started with. You do the following math: $80,000 – $20,000 = $60,000. The amount you need to include is $60,000, not the full value of your RRSP.

Exclusions

Not all assets received during marriage are split at separation. This is called an exclusion. There are strict rules on what can be excluded from your assets gained during marriage.

If an asset was gifted to one party during the marriage, if one party received an inheritance, proceeds of life insurance or a personal injury judgment that was not placed in a joint account and can trace to specific assets or accounts under their own name, then that’s an exclusion.

Generally, gifts after marriage are excluded, but if the funds are spent on a matrimonial home, you are not entitled to an exclusion.

The catch here is that the amount of exclusion you’re claiming must still exist at the valuation date. If you both spent it on a trip to Italy before you separated, then it’s gone.

What’s the difference between deductions and exclusions?

Both deductions and exclusions affect the amount of property split between the parties.

A deduction applies to assets owned on the date of marriage.

An exclusion applies to certain types of assets received during marriage.

An exclusion only applies if the asset still exists at separation or can be traced to specific assets or accounts, but not the matrimonial home. If you inherit something before marriage, then it’s not an inheritance, it’s a deduction – the timing is critical to how the law deals with it.

A deduction does not have to exist at separation or be traced to a specific asset or bank account. You cannot deduct for a matrimonial home that was owned at marriage and you were still living in at separation.

How do I prove deductions and exclusions?

Whoever is claiming a deduction or exclusion must prove the amount. Written documentation is required. The take-away on that? Keep your paperwork.

How much is split?

It’s not an equal 50:50 split of everything you own.

After calculating deductions for assets at marriage and identifying any exclusions, you deduct them from the total amount you owned on separation. You spouse does the same and then you compare the totals. The person with the higher total owes the other half the difference so that you both end up with an equal amount of assets at the end of your marriage. This is called equalization – fancy wording for an equal split between the two of you after adjustments.

It is important to consult a lawyer to determine the correct split. The rules are complex, and you want to ensure you are paying or receiving the right amount.