Each province in Canada has its own laws regarding the division of matrimonial property at divorce. In Ontario, the Family Law Act is the applicable law for dividing property between divorcing spouses. The law provides that each spouse can keep his or her own property, but any increase in property value during the course of the marriage will be shared between the parties.
When a married couple separates, each spouse must figure out his or her net family property, commonly called the NFP. An individual’s NFP is calculated by adding up the value of property owned at the time of separation, then subtracting the value of property owned on the date the marriage started.
For example, if a person owned property valued at $120,000 at the time of separation and property valued at $50,000 at the start of the marriage, then that person’s NFP would be $70,000. If that amount is higher than the other spouse’s NFP, then the spouse with the lower NFP — $40,000, let’s say — will likely be owed half the difference.
The amount owed to the spouse with the lower NFP is called an equalization payment. In the example given here, the equalization payment would be $15,000 — half the difference between $70,000 and $40,000.
It should be noted that these calculations are stated in the simplest terms, and dividing property in a divorce is often much more complicated than splitting numbers down the middle.
For example, the matrimonial home can be a major factor in deciding who must make the equalization payment and how much it will be. To learn more about how the matrimonial home factors into equalization of property, please visit our property division overview.