If you are getting a divorce you will have to divide property between yourself and your former spouse. Divorce falls under federal jurisdiction, meaning it is the same across Canada. This post will only focus on divorce and not on the dissolution of common law relationships, which are under provincial jurisdiction. If you and your spouse do not have a pre-nuptial agreement, you will need to divide your property according to legislation.
Property division is when the spouses divide up all their property between each other. According to the law, both spouses must fully disclose all their assets and debts to each other. This includes bank accounts, joint and individual accounts, pensions, Aero points, joint debt, debt attached to a specific matrimonial asset, family loan debt, RRSPs, business assets, and real property like houses and cars. It is important to note that it is illegal to withhold assets for the purpose of property division. Each asset and debt will fall under one of two categories: matrimonial property or non-matrimonial property. Matrimonial property refers to property that is shared by two people during their marriage and it should be divided between the spouses upon the dissolution of their marriage. On the other hand, non-matrimonial property is not divided between the spouses.
All assets and debts are assigned their own value, such as a house being valued for $1.5 million. At the end of the process the spouses are supposed to walk away with the same amount in total value. That means one spouse may take possession of most of the real property but as a result will owe the other spouse money to make the division equal. For example, spouse A obtains the house, cars, and the furniture, which is valued at $3 million while spouse B gets the vacation home, valued at $2.1 million. In the end spouse A will owe $900,000 to spouse B.
The spouses can negotiate with one another over the property with the help of their lawyers. Negotiations are highly recommended because both spouses can bargain for property that holds special significance to them. If you are attached to an apartment because your kids grew up there, you can negotiate to keep the apartment. This also means it is not necessary to sell the real property to equally divide assets.
If you and your ex-spouse do not divide the property amongst yourselves, you will have to go to court. There is a misconception that if you go to court you will receive more property or you will be happier with the result. This is not true. The courts are bound by the laws set out in the Acts; therefore, they will split everything equally in a way that will likely result in both parties being dissatisfied. Rather than allowing you to keep your house because of its sentimental value, the court is more likely to order the house sold and the money divided equally amongst you and your ex-spouse. Therefore, it is highly recommended that you go through the negotiation process rather than relying on the courts.
Although divorce is common within Canada there are still a lot of misconceptions about property division. Conversations about this topic are often emotional and stressful for all parties involved. Having a lawyer guide you through the process can help relieve some of the stress and anxiety. This is why lawyers often recommend pre-nuptial agreements to couples planning on getting married. These agreements will outline the way property should be divided if the marriage dissolves and in the long run will decrease the amount of time and money the couple will ultimately have to spend if they do decide to divorce.
