DIVISION OF FAMILY PROPERTY

Net Family Property

In the legal context, a marriage is generally viewed as an economic partnership between spouses, in which resources, assets and liabilities are shared. Spouses inevitably become interdependent upon each other to contribute to the family’s wellbeing and upkeep of the household. It is therefore not surprising that upon the breakdown of a marriage the individual parties are often left in a more financially vulnerable position than they would have been had they remained together. Broadly speaking, the primary policy concern is to set the parties upon an equal playing field upon separation. This is achieved through the process of equalization of the parties’ net family property to the extent that it is considered appropriate to do so.

Under the Family Law Act, spouses are considered entitled to an equal share of the total financial result of the marriage. This entitlement is based upon the assumption that both spouses make a vital and generally equal contribution to the economic well-being of the family and toward the growth of wealth for the household. For this reason the equal sharing of this financial product of the marriage applies only to the net value of the property which the spouses share, and not to the gross value of all property held by the spouses at the end of the relationship.

What is “Net Family Property”?

Section 4(1) of the Family Law Act defines Net Family Property this as the value of all the property that a spouse owns on the valuation date. “Property” is further defined as “any interest, present or future, vested or contingent, in real or personal property”. Net family property does not take into account the value of any excluded property owned on the valuation date.

Under the Family Law Act, excluded property falls into the following categories:
1. Property, other than a matrimonial home, that was acquired as a gift or inheritance from a third party after the date of the marriage;
2. Income earned from the property referred to in paragraph 1, if the donor or testator has expressly stated that it is to be excluded from the spouse’s net family property;
3. Damages or a right to damages for personal injuries, nervous shock, mental distress or loss of guidance, care and companionship, or the part of a settlement that represents those damages;
4. Proceeds or a right to proceeds of a life insurance policy, as defined under the Insurance Act, that are payable on the death of the insured;
5. Property, other than a matrimonial home, into which property referred to in paragraphs 1 to 4 can be traced;
6. Property that the spouses have agreed by way of a domestic contract is not to be included in the spouse’s net family property; and
7. Unadjusted pensionable earnings under the Canada Pension Plan.

When is the “Valuation Date”?

Section 4(1) of the FLA recognizes the valuation date as the earliest of five possible event dates in a marriage:
1. Where there is a breakdown in the marriage, the valuation date is the date on which the spouses separated with no reasonable prospect of resuming cohabitation. Determining this date may be difficult especially when spouses have different views as to whether resuming cohabitation is possible.
2. The date before the date on which one spouses dies leaving the surviving spouse;
3. The date on which a divorce is granted;
4. The date on which the marriage is declared a nullity;
5. The date on which one spouse commences an application based on s. 5(3) of the Family Law Act regarding improvident depletion of the family assets, which is subsequently granted.

Please contact our office for more information about the division of family property.