When there is a breakdown of marriage, you and your spouse separate and /or divorce, the value of all the property accumulated during the marriage is to shared equally between you and your spouse, through a process called “equalization”. This is according to the Family Law Act unless you and your spouse have agreed otherwise and stipulated in a domestic contract.
What is Equalization and what are the steps to complete this process? There are two steps of equalization.
Step 1: Calculate Net Family Property:
The net family property for you and your spouse is calculated as of the valuation date. This date is usually date of separation with no possibility of reconciliation. Net Family Property is calculated by putting together a list of all the assets on the date of separation and its value on that date. From the total of this amount, the following are deducted:
- Debts at separation
- Gifts you received
- Property you inherited
- Value of property you brought into the marriage
Step 2: Share the Family Property Equally:
Once step 1 is complete, you must disclose your net family property to the other. The value of the net family property must then be equalized. The spouse, whose net family property is higher, must give the other spouse half of difference between the two amounts. This is called equalization payments.
These steps are applied if you and your spouse are married. The rules of division of property do not apply to common-law couples and their property rights are different.
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